The Time to Sell
I was recalling recently, an interesting conversation with an IFA a few years ago who was considering selling their business. During our discussion they mentioned our guidebook to IFA sales, which states:
“The decision to sell any business must ultimately be a matter of personal choice, but there are certain times when selling can be more advantageous. It is generally accepted that the worst time to sell a practice is when it is experiencing a downturn in its own business performance, as potential purchasers are likely to focus on this as a way of reducing the value of their offer.”
Their question is quite topical given the current uncertainty in global markets and the increasingly tense geopolitical backdrop. Is now really a good time to be thinking about selling an IFA business?
My answer is a clear “Yes” but not because of any market turmoil or geopolitical issues.
When we refer to a downturn in business, we are generally talking about circumstances specific to an individual firm, such as declining income, client loss, regulatory issues, or operational challenges, rather than wider market conditions that affect the entire profession.
Most experienced acquirers understand that market cycles come and go. Short-term fluctuations in fund values or economic sentiment are rarely the determining factor in whether they proceed with an acquisition. Buyers are far more focused on the underlying quality of the business: the client relationships, recurring income, profits, advice process, compliance culture and long-term growth potential.
Demand is strong
The demand for well-run IFA businesses remains extremely strong. Our acquirers have substantial funds available now and active acquisition strategies.
In simple terms, there are currently more buyers than sellers in many parts of the market. We have buyers waiting now to purchase businesses and not enough businesses to sell, this puts you in an extremely strong position.
We are also seeing continued interest in partial sales. Increasingly, advisers are choosing to sell part of their client bank, for example clients they no longer wish to service, while retaining a smaller, more manageable practice. We have completed transactions where as few as 30 clients have changed hands, demonstrating that deals can be structured very flexibly.
As always, we would urge any IFA considering a sale not to accept the first unsolicited offer that comes along. There are many different deal structures available, and taking advice before entering negotiations can make a significant difference to both the value achieved and the long-term success of the transaction.
At Harrison Spence we work independently across the financial services sector, advising firms that are looking to sell, acquire or develop their businesses further. Because we are not tied to any particular buyer, we are able to explore a wide range of options and help find the structure that best suits your personal and professional objectives.