If you’re buying or selling a business ensure you stay close to your adviser, says MICHAEL CURRIE
It’s fair to say that for a number of business owners, the pandemic, and all that came with it, has prompted or brought forward a review of business strategy and an increasing number of businesses have been examining whether this might be a good time to either grow by acquisition or to sell.
In view of this, it’s perhaps not hugely surprising that 2021 heralded a record breaking year for mergers and acquisitions across the world and from our perspective at Aberdein Considine we’ve seen high levels of activity across multiple industries.
In particular, M&A transactions within the financial services market have been numerous, with the recent acquisition of Succession Wealth by Aviva probably the most high profile of these. Aviva paid £385 million in cash for Succession which has about 200 planners, advising on £9.5 billion of assets.
Whilst this, of course, was a high value deal, there is no doubt that developed and mature IFA firms, many of them of a much smaller scale than Succession, have been taking the opportunity to consider their own succession plans and ultimately, exit.
The Succession deal brought into sharp focus the ongoing consolidation process in the Independent Financial Adviser sector which had actually begun well before the Covid crisis, and the levels of interest and enquiries are growing.
The momentum has been clear across the UK, with other consolidators in the market including Kingswood, Verso, M&G and Tilney – as well as other new private equity backed ventures.
During the last two or three years we’ve been engaged in transactions in Scotland and England as well as cross border deals, and it was particularly rewarding to support David Cooke in the recent sale of his Yorkshire based financial planning business DJ Cooke to Kingswood Holdings for £1.5 million.
The catalyst and motivation for deals in this market are a range of factors including growing regulatory constraints and the compliance and HR obligations on principals, many of whom are taking the chance to realise value in their businesses. In addition it also means they can spend more time focusing on their client base.
The relatively low cost of borrowing, the wall of private equity funding, as well as businesses which have amassed significant cash reserves have also meant that certain acquirers and investors are well placed to make the most of these M&A opportunities.
The current business environment remains volatile to some degree, with the recovery from the pandemic still in its early days and, it seems, the cost of living rising by the week. We are also yet to feel the full effects of Brexit, while the conflict in Ukraine is already having an economic impact.
However, despite all of the challenges we currently face, there clearly remains an appetite for deals within the IFA sector.
It also goes without saying that both buyers and sellers should seek early advice prior to entering into negotiations, let alone agreeing headline deal terms or signing heads of terms.
Unfortunately, history is littered with examples where a negotiating position has been undermined by progressing matters in the absence of professional advice.
The sale of a business can be a valuable and positive step, for buyers, for sellers, for employees, for clients and shareholders. If you are thinking of buying or selling, there’s no time like the present to start a discussion. After all, it’s good to talk.
Michael Currie is a corporate partner at Aberdein Considine