Timeframes: Key Considerations

As summer draws to a close, we approach the final third of the year—a period when many IFAs begin contemplating retirement or considering significant changes as the new year approaches. If this resonates with you, there is encouraging news: we still have a robust pool of well-funded acquirers eager to understand your needs.

Smaller firms are currently in high demand, which places owners of such businesses in a particularly strong position from a negotiation standpoint.

While there is now greater flexibility in how sales can be structured, many IFAs still prefer a ‘walk away’ deal. However, achieving such an arrangement requires careful thought and meticulous planning.

In our experience, executing this type of deal correctly can take between 3 to 9 months when working with a broker, and upwards of 12 months if you choose to proceed independently. If your plan was to retire by the end of this year, it may already be too late to initiate a sale, but preparing to market your business in the first quarter of 2025 is certainly advisable.

It is important to bear in mind that any prospective purchaser will conduct rigorous due diligence on your business. As I have previously mentioned, traditional business valuations based on recurring income are increasingly being supplanted by more stringent criteria such as Profit Before Tax (PBT) or EBITDA. This shift is largely driven by the growing influence of Private Equity funding. While recurring revenues remain a reference point, there is now a pronounced emphasis on the profitability of the business, with PBT becoming central to valuation processes.

However, financial metrics are not the sole consideration for purchasers. Some IFAs have yet to fully comply with the Consumer Duty regulations, and it is important to note that inadequate preparation in this regard may deter, or at least delay, potential buyers. It is not sufficient to assume that the incoming purchaser will address all compliance issues; a failure to meet these obligations may result in a negative perception of your business and could adversely affect the price offered.

We have long advocated a pre-sale “MOT” for businesses, where we can identify any issues that might impede a successful sale. In our experience, once the decision to sell has been made—often after many years of deliberation—there is usually a desire to complete the process as swiftly as possible. Delays often lead to disappointment and frustration.

Even if retirement seems a distant prospect, we encourage you to speak with us. We can assist in developing a plan that ensures you are well-prepared for any eventuality.

At Harrison Spence, we possess an unparalleled understanding of the UK financial services sector, owing to our unique position in the retail financial services market and the extensive experience of our partners. I would be pleased to hear from you personally if you believe it would be helpful to discuss your strategic planning or any challenges you may be facing.