Blog / Wealth Management

Thinking of selling up? These are the six 'must have' factors acquirers are looking for. 

The financial services industry has certainly experienced high levels of consolidatory activity over the past few years. There are many reasons an advice firm would consider a merger and acquisition strategy and with factors such as increased price pressure, or challenges regarding regulation, we don’t see activity letting up any time soon. 

This is especially the case for advisers who might be looking to exit the industry. When you look at the average age of an adviser the world over, the possibility of being acquired represents an attractive route to retirement.

Whatever the reason you want to sell your firm, one thing is clear. You have to present it as an attractive purchase opportunity, that an acquirer can quickly recognise and see the long-term value.

A question of scale
Recent activity in the market has been led by large advice networks and product providers acquiring smaller firms to achieve greater scale and assets under management. Those large advisory businesses that are openly operating in this space are likely to be approached by adviser firms who are looking to be acquired.

Once a target has been identified and initial discussions have commenced, the focus moves to the offer stage. This will allow the provider to more formally and openly conduct due diligence on the adviser firm, especially with a view to assessing any historic advice liability that might be incurred if the deal completes.

Before all this though there needs to be an assessment on how well suited the adviser firm is to the acquirer. A point where the quality of MI is critical. The acquiring firm should be assessing the overall data quality held in the adviser firm, the level of contact and control the adviser has over the clients, client segmentation and proposition clarity, and the business growth rate. All of this information can be used to assess the growth potential held within a firm, and perhaps more crucially, the risks associated with acquiring them.

An attractive target?
Different acquirers have different criteria as to what represents an attractive target. Some are looking for an efficiently run business with strong systems and controls, whereas others are looking to acquire firms where they believe they can introduce new processes to realise value by improving efficiencies. Acquirers need to be clear as to what its own criteria for selection is, and then use the available management information to make an indicative offer.
This is where the importance of technology comes in.

If there are two firms, both wishing to present themselves as attractive purchase options to a large acquirer, equal in all respects other than the quality of MI and the underlying technology ecosystem, it’s likely going to be the one that has strategically invested in technology that’s going to be the more attractive proposition.

The quality of an adviser’s technology infrastructure will make it far easier to help build a convincing evidence based business case that will attract suitors. It will also provide firms with a strong hand when it comes to sale price negotiations. A firm that has invested in its integrated technology is also more likely to realise a better purchase price.

So, what are the ‘must have’ factors acquirers look for during their due diligence process to ensure a good overall proposition fit?

The six 'must have' factors acquirers look for:

  1. Financials – including future remuneration from existing business
  2. Segmented customer data
  3. Strong governance and processes
  4. People and company ethos
  5. Sustainability
  6. Reputation

The fact is five out of six on the list can be measured or evidenced by having your tech in order; and with ease. If you’re unable to provide evidence around these key factors, you’re probably going to miss out on the best deals to firms that can. And you can bet your bottom dollar that the firms that are able to demonstrate better value to an acquirer, have a strong, integrated technology infrastructure that makes it easy to interrogate data and produce accurate MI reports.


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