How can advice firms demonstrate better value to potential acquirers?
In a recent webinar IRESS asked advisers considering selling their business the main reason for doing so: over a quarter (27%) said regulatory change. With new legislation on the way in the shape of MIFID II and GDPR, consolidation seems set to be a feature of the industry for some time to come.
Recent M&A activity has been led by large advice networks and product providers acquiring smaller firms to achieve greater scale and assets under management. The recent announcement that consolidator AFH, which has bought 13 advice firms in the last year, is hoping to raise £15m to fund acquisitions, suggests this trend will continue.
So what can advisers wishing to sell do to ensure their business is attractive for acquisition?
When selling your firm, presenting it as an attractive purchase opportunity with long-term value is crucial. Acquirers will have their own selection criteria, but data quality, level of client contact and control, client segmentation and proposition clarity, and business growth rate all help gauge the opportunities and risks associated with acquisition. Quality technology infrastructure will make it easier for adviser firms to build a convincing evidence-based business case that attracts suitors. IRESS’ survey found two thirds of advisers feel technology has enhanced their business by improving data, while a third said it supports better governance and processes. It also provides 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.
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