There are lots of factors to consider before you begin the process of selling your business – while it certainly isn’t going to happen overnight, being prepared means you can be certain you are making the right decision while ensuring each stage runs as smoothly as possible. 


Is this the right decision for you?

No matter what your reason for selling – perhaps you are beginning your journey into retirement, or wish to develop your business with access to new resources, or release capital – the first thing you need to consider is whether you are making the right decision for you and your family.


How important is confidentiality?

Confidentiality is essential for protecting both the buyer and the seller throughout the acquisition process. To ensure a smooth process, you wouldn’t want it to be known in the marketplace that your business is for sale, and you probably wouldn’t want your staff to be aware of the transaction until all details have been finalised. In most cases, a confidentiality undertaking will be entered into at the outset of negotiations. 


Working with agents and acquisition brokers

Some buyers will choose to use an acquisition broker to represent them during this process and also assist in finding suitable buyers for their business. This is an extremely important decision, as you’ll want to be certain that the acquiring firm will be the right place for your clients and perhaps for yourself as an adviser. A broker should have the relevant expertise and be on hand to arrange as many meetings as might be required.

Typically, a broker will charge between 1-5% of the deal consideration (plus any VAT that’s applicable). As a seller, it’s important to be aware that some acquisition brokers believe they are justified in charging a fee to both the seller and the buyer. By analogy, this would be the same as an estate agent charging 4% of the property price to both the buyer and 4% to the seller, for one to sell to the other. However, this dual fee might be couched by the broker, which is clearly not ethical nor standard practise in the IFA market. Not only is it exploiting the vulnerable seller, there is an obvious conflict of interest here on behalf of the broker. Ordinarily, as one might expect, the broker’s fee should and usually is paid by the acquiring party only. Of course, you can also approach acquirers directly, should you prefer.


The stages: what to expect

How quickly and smoothly the process goes will depend partly on the willingness of the parties concerned, but you also need to be organised. It pays to gather all of the information and paperwork right at the start, as doing this will help to make the process of acquiring or selling a business a straightforward one.

In brief, the most important checkpoints are as follows:

  • Negotiate and outline the deal terms and enter into heads of terms
  • The purchaser will carry out legal, financial and compliance due diligence
  • Formal acquisition documentation is prepared and negotiated
  • FCA change in control consent obtained, if required
  • Advisers are authorised with the acquiring firm
  • Advisers will attend an induction hosted by their new firm
  • Transaction completes
  • Client letters are distributed
  • Novations are sent to all providers and tracked on the acquirer’s back office system
  • Online access activated as and when novations are processed
  • Letters of authority processed and distributed for those providers that do not novate
  • Further post-induction training arranged by the acquirer and undertaken by the adviser

Whether you’re planning on staying with your business once it’s sold, or leaving all together, the process of selling is essentially the same. Some of the stages listed above – such as the acquirers’ due diligence, FCA applications and FCA change in control process – will usually happen at the same time, so it’s important that you have all your paperwork together before you start.

The acquirer should arrange for you to be formally inducted so that you are familiar with their internal processes, whilst ensuring competency and effectively embedding firm culture. This will also be a good opportunity for you to meet key individuals in the acquiring firm, as well as your T&C supervisor, with whom you can agree a training & CPD focus for the coming year. Ordinarily, you would expect an enhanced monitoring & training program to be provided along with tailored T&C support for newly inducted advisers.

The transition from your existing firm to the acquiring firm will not be without its challenges. Vendors will find that it takes time to adapt to their new environment and learn all of the new systems and processes that are in place. Whilst the acquiring firm can’t eliminate this ‘transitional phase,’ experienced acquirers can ensure there are robust processes and measures in place to make this move as smooth as possible, for both you and your clients. 

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