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Consolidators use election and market crash threats to woo advisers

Approach to IFA firms use new tactics to get advisers to sell.

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Mergers and acquisitions brokers are using last week’s election result and the possibility of market volatility to woo advisers into selling their businesses.

Two approaches from M&A middlemen to advisers in recent days seen by Money Marketing have urged advisers to consider selling their businesses before either tax breaks are eliminated or markets move.

A circular from acquisitions broker Capital and Trust reads: “If a new government is voted in (in the coming months after last week’s election left the country politically paralysed) then anything other than a Conservative government will likely see Entrepreneurs Relief abolished.

“Not meaning to scare monger, just stating the obvious.”

Chief executive Patrick Isaacs tells Money Marketing: “I genuinely believe it…. Every year that goes by there’s an element that Entrepreneur’s Relief might be in jeopardy, even with a Conservative, pro-business Government.”

Entrepreneur’s relief reduces the amount of capital gains tax paid when all or part of a firm is sold under certain conditions, with sellers paying 10 per cent on all gains on qualifying assets instead of a higher rate.

Another approach from consultancy Berkeley Cannon, signed by chief executive Tony Fox, warns advisers that now might be the peak time to sell before a market crash could hit.

“How many people do you know that were making excellent profits and doing very well, delayed selling and then missed their opportunity? Putting them back decades?

“I think the markets are littered with them, from recruitment companies, to Dot Com businesses, to banks [and] mobile manufacturers. And I am certain within the IFA space many firms also break down before they realise their true worth, mass staff exits, compliance issues etc.

“Personally, I think IFA businesses are more resilient than most, and more so now with the built in recurring income element people have built up but no business is immune to market crashes.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. An awful way to do business. Easily resolved, however, just don’t engage with a firm using such tactics.

    If you are thinking of selling make sure you align yourself with someone who is culturally similar.

    As I have said many times, selling an IFA Business is not like selling your car. The clients need to be taken on a journey. They need as much reassurance about your next move as they do about the things you have helped them with in the past.

    The value in an IFA business is not the recurring income. It is the trust that clients have in the existing adviser. That trust does not suddenly stop!

    We have taken several firms on in the last six years and in several instances the monetary sale value was lower then could have been obtained elsewhere. That’s a brave statement for me to make but is evidence that the seller, quite rightly, has recognised the value of having the correct cultural fit.

    Keep it simple. Don’t risk unravelling all your hard work of the past in an instant.

  2. Tony Fox 14th June 2017 at 4:48 pm
    Somewhat out of context Justin and may be the person who sent you our email did not read our disclaimer – But thank you for quoting me.
    I was marketing a well established IFA’s buyout proposition. I would not class them as a consolidator at all, for those interested in something in context by all means, read on.
    Subject: 20 times – 1 reason – But maybe the reason you should sell your business, is for exactly the same reason you may not want to?!!
    Dear XXX,
    I hope this reaches you well?
    Do you want to sell?
    Do you have High profits and High turnover, between £250k and £30 Million turnover and between £100k and £5 Million actual profits?
    Do you want to sell?
    If my buyer could help you achieve 20 times your actual profits if your profits are less than 10% of turnover does this appeal to you?
    If my buyer could help you achieve 4 times recurring income if you already have high profits, would this appeal to you?
    Do you want to be part of a larger business that can support you in every way and have a culture and client proposition second to none?
    Do you want to sell to an Independent Firm?
    Do you want a future capital event after you have sold 100% of your existing business so selling now does not mean you lose on future business growth?
    Do you want a buyer and business that values you on your achievable future growth and not just your last years numbers? Including natural movements up as your revenues increase because of the markets?
    Do you want a buyer that will protect your down side if markets move against you? Or if clients leave due to their mistakes?
    Do you want a buyer that can buy you out and still pay your advisors, employed or self-employed at the same level or more so they come with your deal? Not only that but can ensure that they also participate in future capital events where applicable?
    Do you want a business that can accommodate different owners, retiring or staying and still buy your business in its entirety or in some cases in parts?
    Do you want a buyer that you can trust?
    Do you want a buyer that can make your client experience and costs improve after your deal?
    Do you want a buyer that can either sustain your success or help you transform into something more along the lines of what you want for yourself, your team?
    Then we should be speaking?
    This buyer from start to finish can complete a deal with you in 8 weeks or 8 months, they are flexible and will work around you, ideally, they are looking for people who are ready, willing and able to sell if the right deal is put in front of them.
    We have comparable offerings, and we will share these with you when we engage and we will encourage you to see those that meet your criteria, as we find a well-managed process, will help you come to a decision and remain in the driving seat when negotiating with buyers, but when all is said and done, we still think the above buyer will be one you will either bench marking against or at least considering against your options.
    We get paid in line with your success, the more we achieve for you the more we get paid, most buyers pay our fee unless you would prefer us to have an agreement with you which is often unnecessary, so using us comes at no financial cost to you. In the past 12 months, we have helped IFA’s sell £2 Billion in assets to our buyers, and we have rehomed over 110 advisors and 25 shareholders into these buying practices. All had enough choice that they could be happy with their decision and were, because of this choice empowered to decide based on all the facts. So, they knew exactly what their business was worth in the open market before committing.
    They didn’t lose any sleep later wondering did I sell for the right price, was it the best deal ?
    They all found that this choice helped them secure the best financial and physical terms for them and their fellow shareholders.
    Like you all my sellers were focused on their client outcomes, and chose the deal that best suited everyone.
    For an initial chat please call me either in the office or my direct mobile which is often best 07961 639 177. Or to arrange a time for a more detailed conversation please email me so we can book something in.
    Or maybe looking for reasons not to sell, may be the reasons you are not wanting to sell are exactly the reasons why you should sell?
    How many people do you know that were making excellent profits and doing very well, delayed selling and then missed their opportunity? Putting them back decades?
    I think the markets are littered with them, from recruitment companies, to Dot Com businesses, to Banks, Mobile manufacturers. And I am certain within the IFA space many firms also break down before they realise their true worth, mass staff exits, compliance issues etc.
    The first company I was in where I had an equity stake was turning over £7 Million a Year, and we had a £10 Million offer, and the two majority shareholders, said no, and 1 month later, the IT crash came which was particularly key to our business that focused on IT services.
    My division, I built with a team of 6 were still making £3.5 Million turnover a year almost a year later because my division was the recurring income side, the other two directors division went from monthly revenues of £350k a month down to just £20k, with 20 staff as it was all transactional business and nobody was writing new business. 7 years, year on year exponential growth gone. No buyers were buying and it took them 10 years to show interest again. And even the recurring income side of the business started to suffer as it relied on replacing clients that left, and people stopped spending. This business had a natural attrition for all recurring income of about 20% annually.
    Personally, I think IFA businesses are more resilient than most, and more so now with the built in recurring income element people have built up but no business is immune to market crashes.
    All the above example does is prove that often the reason you should sell your business is for the same reason you don’t want to. Things are going very well !!!!
    The best time to sell bar none is when you have something attractive and of course when demand is high, and that is now, if these buyers don’t buy and succeed they will leave the buying community and change their tact, and your pool of choice and these higher prices will be harder to find. Are they here to stay, may be so, all I know is the demand is hard to ignore right now.
    But of course, you must be ready to sell, if your reasons for not selling are not insurmountable you can sell now and quickly, you just must want to though. We have the choices you need to get the very best outcome. Even if carrying on is preferred.
    So do contact me if you could be or are interested in finding a buyer for your business or in meeting the buyer we describe above.
    Sincerely,
    Tony Fox
    Berkeley Cannon
    M – ++44(0) 7961 639177
    T – ++44(0) 207 745 2300
    Marble Arch Tower, 55 Bryanston Street,
    Hyde Park, London,W1H 7AA.
    tony.fox@berkeleycannon.com
    http://www.berkeleycannon.com
    The information in this email and any attachments or any reproduction of this email in whatever manner is confidential and for the use of the addressee(s) only. If you are not the addressee then the distribution, use or reproduction of this email or the information within it is strictly prohibited and may be unlawful. If received in error please advise the sender and delete all record of it from your system. Although believed to be virus free, accurate and complete, responsibility for any loss or cost arising from its receipt or use or its incomplete or inaccurate transmission is hereby excluded to the fullest extent possible. Use of the above information that consequently leads to the recipient acquiring or merging with a business named in this email means you agree to pay Berkeley Cannon a fee equivalent to their standard terms of business. These are available on request.

    • Tony Fox is a pain. Despite numerous requests to be unsubscribe from his unsolicited emails he just ignores them. I would question this person if you are thinking of selling your business. He doesn’t listen, it’s a husband, wife and daughter team, none of which are directors!

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