Your established client base may be regarded as the chief asset of your business and the major source of value that attracts your buyer. However, because of the need to protect your clients, there are certain steps required to transfer and integrate your clients into your buyer’s business.

Client migration

Transitioning clients from your firm to the acquiring business may be done by way of a novation, or by Letter of Authority (LOA).

A novation is essentially a bulk letter of authority. They don’t require individual client signatures and only need to be signed by the director of the existing firm and a director of the acquiring firm. Novations are therefore an easier solution to use during an acquisition.

During the due diligence process, the acquirer will request an up-to-date agency list, detailing all of the providers that you use and their corresponding agency number. The acquirer should then prepare a novation for each provider as soon as possible after completion to prevent too much interruption to your client’s service.

However, some providers won’t process novations and will insist on Letters of Authority being completed by every affected client. Other providers will novate, although they require additional forms or information. It’s imperative that the purchaser makes you aware of these providers in advance to allow the necessary relevant documentation to be prepared.

Any delay in transfer of your clients may impact the service they enjoy. You don’t want a lack of knowledge on the acquirer’s behalf to delay transfer of your clients and impact your ability to service them. An experienced acquirer will therefore aim to process the novations as soon as possible following completion, to allow for a smooth transition. Novations and LOAs should then be monitored on the buyer’s back office system and managed until all are completed.

Client correspondence

Details of the acquisition will be strictly confidential until completion of the transaction is announced to the market. Your clients should then be informed without delay; it’s an FCA requirement that when novating, you have informed all affected clients about the acquisition.

It’s usual for the acquirer to manage this communication. You will have been required to provide them with an accurate client list during the due diligence stage.

The purchaser will work with you to draft a suitable letter, to help ensure that your clients feel informed and included. Acquirers should recognise that it’s important for you to personalise the letter and introduce the acquiring firm to your clients. This is especially relevant where you are exiting the industry. It’s you who has built the relationship and trust with clients and your involvement is important to provide the impression of a continuity of service.

With a buy-and-go scenario, you will also want to ensure that the buyer has adequate resource and appropriate geographical coverage, so that a client meeting can be arranged promptly. This first impression is very important for client retention. It’s good practice for the acquirer to also send a welcome letter to each client, to provide a positive impression and establish their own relationship with the client.

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