You will also have some amber lines. It may be appealing to find an acquirer who uses the same back office system as you for example, but would a change here have a material impact? Probably not.
Typically larger firms, or those newer PE-backed entrants, are building significant size and scale and are able to offer inflated enterprise values.
Before considering the financial offer, getting the cultural fit right is key.
As a mentioned earlier, agreeing the sale is only one part of a successful exit, retention of staff and clients post-transaction demonstrates true success for you and the buyer.
When you sell things are going to change, and an appreciation of the acquirer's model is paramount.
There is an interim period where you want to limit client upheaval, but the new firm has their own governance structure and processes to adhere to.
With consumer duty, the spotlight is now even more firmly on fair value for all clients, and so integration for the acquiring firm is important and should be planned in advance of the transaction.
If your clients value face-to-face advice, you have been banging the drum about evidence based investing, or you operate a fixed fee charging model, selling to a remote advice business with an active investment philosophy and an ad valorum charging structure is probably not going to work, regardless of how attractive the headline offer is.
Firms that are vertically integrated are also able to make stronger financial offers.
These firms can benefit from fees from other parts of the advice chain, such as the platform fee and/or investment management charges.
Vertical integration is a very polarising term, but not all vertically integrated firms are the same.
As well as improving profitability and inherent value, vertical integration can manage risk for a larger business, reduce costs for clients and improve processes.
Where efficiencies can be gained, output improved, and cost savings are passed on to clients this can provide a great outcome all-round.
The retention of key members of staff is important in succession, so ensuring the acquiring firm can meet their ambitions will result in better staff engagement.
Remember your staff have chosen to work for you, they have not chosen to work for the acquiring firm. And just like your clients, they can vote with their feet.
There are some superb privately owned firms with ambition to grow through acquisition, and while they may not be able to offer the headline rate a larger firm can, if the cultural alignment is strong this trade-off in value could be accepted for the continuity provided.
