Navigating the IFA Market in 2025 – Is Now the Right Time to Sell?
A Shifting Market: Opportunities and Considerations
The IFA market remains favourable for sellers, with strong demand from acquirers looking to consolidate smaller firms into larger, more efficient operations. High valuations continue to be achievable, with multiples of recurring income still forming part of the conversation. For example, a business with recurring revenue of £750,000 could currently command valuations in the region of £3 million to £4 million, depending on factors such as client demographics, profitability, and operational efficiencies.
Changing Valuation Metrics
As highlighted previously, one of the most significant changes in recent years has been the way IFA firms are valued. Traditionally, businesses were assessed primarily on multiples of recurring revenue. However, acquirers, many of whom are backed by Private Equity are now applying more rigorous financial scrutiny.
Rather than focusing solely on recurring revenue, buyers are increasingly basing valuations on EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) or Profit Before Tax. While discussions may still reference recurring income multiples, the key driver of valuation is now profitability. This means that IFAs with strong bottom-line performance will attract higher multiples, while those with inefficiencies may struggle to achieve the valuations they expect.
Furthermore, changes in tax allowances will have a direct impact on the net proceeds of a sale. Unless you are already well-advanced in your sale process, it is too late to benefit from the Business Asset Disposal Relief (BADR) rate of 10%, which is set to increase to 14% from 6th April 2025.
However, there is still time to act before the rate increases further to 18% on 6th April 2026. With the right planning, we can help position your business effectively to maximise its value before these tax changes take effect.
Is Now the Right Time to Sell?
Our analysis suggests that the high valuations seen in recent years may not be sustainable in the long term. With increasing financial scrutiny, evolving tax considerations, and the gradual tightening of market conditions, now may be the best opportunity to achieve the highest possible price for your business.
For those who are not yet ready to exit completely, many acquisition models offer the flexibility to remain involved post-sale. So, money banked now and continued paid employment if you wish. Or alternatively, there are buyers who will acquire part of your business with the opportunity to continue to grow the business further and share in a future sale value with the buyer.
What if your business is larger or smaller than the example above?
There are buyers for all sizes of businesses so please do contact us whatever the size of your business if you would like to discuss matters further.
Expert Guidance for Your Next Steps
As independent consultants specialising only in the retail financial services sector, we offer strategic advice to IFAs looking to optimise business growth or plan an effective exit strategy.If you are considering selling your firm or are wondering what opportunities are available at the moment, we invite you to discuss your specific circumstances with us in complete confidence. Our initial consultation is always at our expense, providing you with the opportunity to explore your options with no obligation. If you would like a confidential conversation, please do get in touch.