Selling Your Financial Advisor Business | KBS Corporate

Selling Your Financial Adviser Business

If you are considering selling your IFA business, read through our comprehensive guide on this page to the important steps along the journey and how we can help you to navigate them.

We will discuss the reasons for selling a financial adviser business, the importance of obtaining an accurate valuation of your company and how you can thoroughly prepare for your exit.

Let’s firstly touch upon why IFA business owners decide the time has come to sell their business. This can encompass a readiness to retire, regulatory changes that may render their work more complicated and financial difficulties potentially caused by decreasing revenue streams. We will discuss this in more detail below.

When the decision to exit your business has been finalised, what type of sale do you want to achieve? You could include all the company’s shares, assets and goodwill in the valuation or simply sell the client bank. And do you want a clean break or a phased exit whereby you could continue to work with a reduced number of clients, perhaps for a limited amount of time?

Joining forces with KBS when selling your IFA business can help you to clarify these decisions, putting the groundwork in place to accomplish all your objectives.

How Can I Sell My IFA Business?

Several different options are available to company owners who are looking to sell their financial planning business:

Trade buyers: Companies operating within the financial advisory sector may identify your business as a worthy acquisition which can complement their existing operations, perhaps by way of a different service offering or a new geographical market.

Private equity: In recent years, an increasing number of private equity houses, especially those based in the USA, have been buying UK financial advisory companies and we have strong connections with these types of investors.

Management Buy-Ins/Buy-Outs: If you have senior staff ready and able to take on greater responsibility after your exit, an MBO could be an appealing option. An MBI, meanwhile, is when the acquirer brings in their own leadership team to oversee the company’s operations.

Employee Ownership Trusts: An EOT is established on behalf of, and for the long-term benefit of, the company’s employees. The staff will be incentivised to contribute to the future success of the business – and EOT sales are completely tax-free.

Other alternative routes: These include institutional investors such as pension funds, investment banks, mutual funds, family offices and initial public offerings. Our ability to think outside the box enables us to target these additional buyer types.

It is possible to go it alone with a business sale and/or hire a solicitor/accountant to help you, but there are many factors to consider and the benefits of having expert advisers such as KBS on your side are sizeable.

Key Considerations For Selling A Financial Adviser Business

Selling an IFA business can be a lengthy process, but the rewards will be tangible once it has all been signed, sealed and delivered. It will require thorough preparation, an accurate valuation, auditing due diligence and strong negotiation techniques on the way to a successful completion.

The following steps are of particular importance:

Have a clear goal in mind: What do you specifically want to achieve from selling your company? Whether it’s enough to fund a comfortable retirement, relocation or a new business venture, be sure to know your exact objectives – it will sharpen your focus to strike the ideal transaction for you.

Prepare for the sale: There is no such thing as starting too early when you are preparing to sell your financial planning business. Act upon the advice you would give a client – get all your accounts up to date, streamline processes, minimise costs and ensure the right staff are in the right roles.

 

Defined revenue streams: Recurring revenue streams are a key attraction when it comes to selling your IFA business. If you have a consistent cashflow, acquirers will view that as a solid basis on which to scale up the business, perhaps by combining client banks.

Value your business: Setting a realistic valuation is critical to your chances of achieving a successful sale. We can help you to decide on a target figure that meets your specific requirements for the plans you have in mind and does not price you out of the market.

Evaluate potential buyers: Who is the right fit to drive your company forwards? With our extensive buyer reach, we are perfectly positioned to identify the ideal acquirer who has the financial means and experience to ensure your business remains in good hands.

Negotiate the final settlement: Again, this is something at which we are proven experts in helping business owners. An acquirer is sure to have their own ideas about how they want the final deal to look and having us in your corner will boost your negotiating power.

Why Sell Your IFA Business?

As mentioned above, there are various reasons why business owners choose to sell their financial advisory company.

Although personal circumstances often drive the decision, it can also be influenced by professional factors such as rising insurance costs, increased regulation, compliance, expenditure associated with the Financial Services Compensation Scheme and increased administrative overheads.

However, the decision to sell your business does not have to be a reactive one in response to financial or legislative pressures. You can be proactive by weighing up the prevailing demand for companies offering sound financial advice as market conditions may be indicating this is the perfect moment to sell.

Should you establish that it is the right time to proceed, you will need to ensure that when the sale goes through, the transition is seamless. Your clients will not countenance any drop-off in the service your company provides and once the handover is publicly disclosed upon completion, it will naturally need to be presented as a positive piece of business for all parties.

Valuing Your Financial Adviser Business

We referred above to striking the right balance for the valuation of your IFA business, but how should that be calculated? It is not a matter of guesswork or plucking a figure out of the air.

The valuation could be based on your recurring revenue or the profitability of your company, known as the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation).

Other factors that can influence the valuation are the company’s location, reputation, client profile, fee structure and retention levels.

Payment Terms When Selling A Financial Adviser Business

In recent years, due to the increasing market interest in acquiring IFA companies, the trend has become for business buyers to pay a greater proportion of the purchase price up front. Typically, anywhere between 50% and 75% of the agreed sale price will be paid up front in cash.

The remainder would be deferred, paid at a later date and unconditional – although, unless some form of security was put in place, it would be at risk if the business became insolvent.

Another option is an earnout, which is related to the company’s performance and usually applies when the seller continues to run the business on the buyer’s behalf for a certain length of time.

Common Legal Issues When Selling A Financial Adviser Business

Legal issues when selling an IFA business are generally in line with those encountered in any other type of business, namely:

  • Due diligence – read our detailed guide here
  • Negotiating and drafting the Heads of Terms and final sale agreement
  • Warranties and indemnities
  • Property law matters, in relation to whether the business premises are owned or commercially leased
  • Employment law matters, such as TUPE which stands for Transfer of Undertakings (Protection of Employment) for staff being switched from one employer to another
  • Data protection and intellectual property
  • Tax-related aspects – read our detailed guide here

Should you require help with any of these matters, we can put you in touch with one of our designated legal partners as part of the complete business sales service we provide.

Expert Support Selling A Financial Adviser Business

KBS has succeeded in selling financial planning businesses for 25 years. Providing a bespoke, tailored service for every individual transaction, our team of experts utilises their experience, technical knowledge and network of contacts to negotiate the best possible deal for you.

Contact us to find out more about how we can deliver the sale of your IFA business and fulfil all your objectives.

RECENT BUSINESS SALES IN THE FINANCE SECTOR

X
Completed Sale

Davidson Deem Ltd

Davidson Deem Ltd has been sold to a European wealth management firm, with KBS Corporate Associate Director Matthew Sibley advising throughout the transaction.

Led by directors Peter Stokes and Brian Keane, Davidson Deem provides mortgage brokerage services across the UK.

The Dorset-based firm has secured mortgages since 1989, benefiting from a team of qualified, impartial advisers with a proven track record of success.

Peter Stokes and Brian Keane were ready to explore the M&A market, looking to expand under the impetus of new ownership.

Matthew Sibley said: “Peter and Brian have built a great business with strong financials and a large client base.

“KBS has a dedicated outreach team that can find the right buyers and Davidson Deem was an attractive opportunity to approach prospective acquirers with.”

Lumin Wealth, part of Swiss financial provider VZ Group, has acquired Davidson Deem as a step in its long-term strategy to grow in the UK’s mortgage industry.

Utilising offices in London, Cambridge and St Albans, Lumin Wealth manages client assets valued at over £1billion.

“Lumin has identified Davidson Deem as the ideal platform from which to build its own mortgage network,” added Matthew Sibley.

“Peter and Brian have seen a great opportunity to grow with Lumin by upselling and cross-selling services across Europe, while offering further solutions to their own client base in the UK.”

Commenting on the sale, Peter Stokes said: “Over the past 12 months, we have carefully ensured this transition is seamless for our clients.

“Not only will they continue to have access to our mortgage services but they can also benefit from Lumin’s complete range of financial solutions, which spans everything from pensions and investments to retirement planning and protection.”

Davidson Deem was supported during the transaction by Leilah Ashurst of Nexus Solicitors. Matthew Sibley added: “I’m very happy with the outcome. I’m glad Peter and Brian have been provided with such a strong future for Davidson Deem — it will be a great acquisition for both parties.”

acquired by

Davidson Deem Ltd
Sector: Financial Services
Location: Dorset
Buyer: Lumin Wealth

 

Ready to talk about your business requirements?

Give us a call on
+44 (0) 161 258 0118 or contact us now to get started.

Completed Sale
acquired by
Davidson Deem Ltd

Sector: Financial Services
Location: Dorset
Buyer: Lumin Wealth

X
Completed Sale

RDS

RDS was established in 2017 and assists SME businesses and accountants in accessing R&D tax credits. Since the company’s inception, RDS has developed a large national client base specialising predominately within the manufacturing, technology, construction, scientific and engineering sectors. Over five years RDS has enabled its clients to receive more than £27m in R&D support. The company differentiates themselves from their competition through RDS’ pioneering marketing strategy and technological yet personalised approach.

The founders of RDS, Geoff Liberman and Mark Joyner, approached KBS Corporate Finance with the sale of their business to facilitate further growth.

KBS Corporate implemented a diverse research strategy which resulted in the ultimate offer from BGF. The £5m investment will enable RDS to pursue further investment in their innovative technology and expanding their current headcount.

Commenting on the deal, RDS Director Mark Joyner said: “My personal passion is working with businesses and understanding what makes them successful. Companies often don’t realise they are eligible for R&D as it’s not always just about developing new products or ideas but can apply to developing new ways of doing things, or the adaption & development of processes to improve their product or service. We’re well placed to support all shapes and sizes of business to receive credit or repayment for their innovation to reinvest and grow.

“When we started to consider an investment partner, we’d had interest from trade buyers and private equity. Where BGF stood out was their long-term, collaborative approach and shared ambition for the business. We’ve rapidly grown in the past five years but with this investment, we have the people, experience, and capital to surpass all our previous goals.”

Pinesh Mehta, investor at BGF in the North West, commented: “Geoff, Mark and team have built a business with strong fundamentals and an innovative marketing approach. Given the backdrop, innovation is a significant force for good in driving business growth. RDS has created a competitive edge through its thorough approach and has invested in some impressive client technology that will create efficiencies and simplify processes even further, providing a platform for the business to scale. It’s fantastic to be backing such a strong team and compelling offer to help take the company to the next level.”

Dave Gardner, KBS Corporate Finance Director, advised RDS throughout the process and commented: “The deal with BGF provides an exceptional strategic fit for RDS and one which I have no doubt will accelerate the business’ growth plans. They have wasted little time having already successfully identified and secured new talent at both operational and board level to supplement the already impressive team. With RDS’ track record of facilitating millions of pounds of R&D tax credits for its clients to support their continued innovation, this is an investment that should benefit SME’s entrepreneurs and the economy in general following a challenging couple of years.”

acquired by

RDS
Sector: Research and Development Tax Credits
Location: Greater Manchester
Buyer: BGF

 

Ready to talk about your business requirements?

Give us a call on
+44 (0) 161 258 0118 or contact us now to get started.

Completed Sale
acquired by
RDS

Sector: Research and Development Tax Credits
Location: Greater Manchester
Buyer: BGF

X
Completed Sale

Admiral Wealth Management

Admiral Wealth Management offers comprehensive investment and pension advice. The company benefits from a large client base, the majority of whom provide reliable, repeat business on an ongoing basis. Admiral Wealth Management has an excellent reputation which has been developed since 1989.

The shareholders of Admiral Wealth Management instructed KBS Corporate with the sale of their business to allow them to facilitate their retirement plans.

KBS Corporate implemented a diverse research strategy which resulted in 54 interested parties being identified with the majority coming from UK trade buyers. The successful offer came from Kingswood, a fully integrated wealth and investment management group that operates internationally.

David Lawrence, UK CEO at Kingswood, commented on the deal: “Since becoming UK CEO at the turn of the year, I have focussed on building momentum in the business and expanding our capabilities to integrate and grow. Our focus on enhancing the client experience is paying dividends and I am delighted that we now have approaching GBP200 million in our internal MPS. I am thrilled to announce our first acquisition under my leadership and look forward to welcoming Mike Biggin, Adam Harrison, and the Admiral team to Kingswood. Admiral is a highly regarded provider of financial advisory services in North Lincolnshire and Yorkshire having consistently delivered a high-quality service to clients for over 30 years.

“The Kingswood model is designed to provide a centralised, efficient support infrastructure to manage the routine, but time consuming tasks required across compliance, finance, human resources, risk and technology, allowing the Admiral team to deliver a superior level of service to their clients. I am delighted that Mike and Adam have agreed to stay with the business as it enters a new phase as part of the Kingswood Group and I very much look forward to working with them.”

Annie Shiel, KBS Corporate Associate Corporate Director, advised Admiral Wealth Management.

acquired by

Admiral Wealth Management
Sector: Financial Advisers
Location: Lincolnshire
Buyer: Kingswood

 

Ready to talk about your business requirements?

Give us a call on
+44 (0) 161 258 0118 or contact us now to get started.

Completed Sale
acquired by
Admiral Wealth Management

Sector: Financial Advisers
Location: Lincolnshire
Buyer: Kingswood

Speak to our expert team on 0161 258 0118 to arrange a consultation

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