Agreeing the price at the start of a transition
How the timing of a sale affects the price, and what agreeing a floor when you join Securo changes.
How the timing of a sale affects the price, and what agreeing a floor when you join Securo changes.
A principal may sell because they have had enough, because of their health, or because a network deadline is a fortnight away.
At those points the seller has few alternatives, and in a negotiation the side with fewer alternatives usually accepts a lower price.
A buyer looking at a firm whose principal is visibly exhausted can infer four things: the seller wants the deal finished; the files have probably drifted, because a tired principal deals with urgent work first; succession has not been solved inside the firm; and if this deal falls through, the seller’s next option is a similar conversation some months later on the same facts.
The buyer reflects this in the offer.
A broker or a competitive sale process can improve the price, and for a firm in good order the improvement can be significant. It does not change the timing: the seller is still selling now, with the files in their current state.
Your position is stronger when you agree the terms while the business is running well and you could still walk away.
Under Securo, you keep ownership of your firm when you join. You keep advising and you keep the firm’s name. What is agreed at the start is the basis of a future transaction: that Equity & General will acquire the assets under management when you decide to retire, at no less than market value at that point, with the structure shaped around what you want the following year to look like.
The agreement sets a floor for the price, and the final figure is based on market value at the time you retire. This stops the price being set in a month when you are under pressure to accept whatever is offered.
You are not obliged to use the exit terms. Some advisers find that once compliance, paraplanning and administration are handled for them, they want to keep advising for longer.
Exit terms need to be agreed while you still have other options.
How the handover meetings, the client file, the acquiring firm and written commitments decide the service your clients receive after you retire.
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A long-established firm may have clients paying for an annual review they have not had. This is a Consumer Duty issue first and a valuation issue second.
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Making sure somebody else at the firm has met each client takes about two years and raises what the firm is worth.
Read itSteven Bates, Director of Advisory at Equity & General, takes the first call with every adviser. Ring him on 020 8396 0486 or send a short note about your firm.