Whether you’re buying, selling or merging an advice business there will be a number of factors at play which, while not perhaps garnering the attention upfront, will nevertheless need to be appreciated by all parties to the transaction. In our experience it’s best these factors are considered earlier rather than later in the discussions.
- End goals – what does success really look like?
While the strategy driving any acquisition or merger will vary (think need for scale or to leverage existing infrastructure, gaining access to needed capability or desire to open a new niche for example), it should be accompanied by a clear understanding as to key milestones and end goals, which, in turn, are underpinned by a financial bottom line – what will the transaction contribute in terms of ROI.
KEY TAKEOUT: GOALS SHOULD BE DRIVING THE TRANSACTION, AND THEY SHOULD BE CLEAR, MEASURABLE AND ACHIEVABLE.
- Clients – less alignment = more implications
While transactions will naturally focus on the financial aspects of the deal, it’s also important that due consideration is given up-front to the clients who will be impacted by the purchase/merger.
How compatible are they in terms of age, occupation and services for example? Are they paying similar levels of fees; receiving and/or wanting the same types of services; working in a similar way with their advisers for example?
During any merger/sale, communicate, communicate, communicate – to all clients. Check in regularly with your staff as to early warning signs, as they’ll be the first to notice.
KEY TAKEOUT: PAY PARTICULAR ATTENTION TO THE RANGE OF SERVICES OFFERED/TO BE OFFERED TO CLIENTS.
- Staff – when two tribes meet
Just as for Clients, in most purchase/merger situations there will be two sets of staff who will need to get to know each other, understand how their roles will look in the new environment, how they will interact and work together going forward.
During merger/sale – communicate frequently and meaningfully with all staff, framing the conversation around the ‘why’ and ‘what’ elements of the transaction while reporting regularly on progress to plan. Make time for ‘one on one’ check-ins.
KEY TAKEOUT – GET A CLEAR HANDLE ON HOW THE TWO ENTITIES LINE UP/COMPARE IN PERFORMANCE MANAGEMENT AREAS SUCH AS JOB DESCRIPTIONS, PERFORMANCE REVIEWS, REMUNERATION, PERSONAL/ PROFESSIONAL DEVELOPMENT AND ‘WORK FROM HOME’ EXPECTATIONS.
- Business as usual – is not likely
Financial advice practices are multi-faceted with lots of moving parts – most purchase/merger situations will require change; ‘transition’, ‘conversion’, ‘migration’ and ‘adaptation’ will all become part of the business’ lexicon.
Think – platforms, product providers, investment philosophies, service standards, communication protocols and complementary services (estate planning, aged care, Centrelink) for example.
KEY TAKEOUT: AN EFFECTIVE DUE DILIGENCE PROCESS WILL ALLOW YOU TO GAIN A CLEARER APPRECIATION OF THE LEVEL OF LIKELY DISRUPTION (AND ITS COST).
- If I’m paying, I’m saying
Self-evident perhaps, but we’ve observed on any number of occasions the look of surprise when it finally dawns on the exiting owner, or minor merger partner, that the person who is drawing the cheque will usually have the final say on all key operational and strategic issues going forward.
It could be adding new services or moving to a new platform or tech provider for example. And given that the biggest expense item for any business relates to its people, ongoing roles, training and capabilities will definitely be areas of major interest for an incoming buyer or partner. Doubly so, re the ongoing role of the selling partner.
KEY TAKEOUT: LESS EQUITY EQUATES TO LESS INFLUENCE. GAIN AS MUCH INSIGHT AS POSSIBLE INTO THE FUTURE INTENTIONS OF OTHER PARTIES AND BE HONEST WITH YOURSELF AS TO WHERE YOU WILL SIT IN THIS EQUATION AT THE END OF THE TRANSACTION.
As we always remind clients who are looking to transition through selling, buying or merging – plan and do the due diligence before taking action. Getting an external perspective can often bring clarity and focus.
For your consideration.