Expert: Alex Canham, Partner, Corporate, Herrington Carmichael Facilitator: John Chapman, Director, Catalyst Partners
Headlines:
- The importance of thorough preparation, clarity in negotiations, adviser retention, integration post-sale, and navigating regulatory guidance
- Effective preparation was highlighted as crucial for preserving business value and ensuring a smooth sale process
- Risk allocation between buyers and sellers, particularly around compliance liabilities and advisory responsibilities as well as the importance of establishing clear expectations on deadlines and non-negotiables
- The rising concern around ongoing service reviews and fee justification, with acquirers increasingly scrutinising the transparency of service charges
- Challenges surrounding adviser retention and cultural alignment post-acquisition were discussed. Securing advisers with updated employment contracts, offering incentives, and focusing on cultural integration were seen as vital to retaining both advisers and clients through transitions
- The impact of evolving regulatory requirements, such as the FCA's Consumer Duty, on business valuations and sale processes
Discussion points:
Preparing for a sale: key considerations
The importance of preparation for a successful sale process. This includes self-reflection on the business's strengths and weaknesses, conducting due diligence on potential buyers, securing key advisers with proper contracts, managing client expectations, and ensuring ownership documentation, leases, and personal assets are in order.
Negotiating the deal
The importance of understanding risk allocation between buyers and sellers, particularly regarding advice and regulatory compliance liabilities. The need to establish clear deadlines, expectations, and red lines during negotiations, as well as addressing key terms like warranties, indemnities, and payment structures.
Ongoing reviews and charges: an emerging concern
Ongoing reviews and charges was identified as an emerging area of concern for acquirers, particularly regarding the demonstration of proper service delivery and fee justification. Increased scrutiny and provisions around this issue in future sale processes is anticipated.
Adviser retention and integration challenges
The challenges of adviser retention and integration after an acquisition, sharing insights on the importance of enforceable contracts, incentives, and cultural alignment to retain key advisers and clients during the transition.
Regulatory considerations and guidance
The regulatory considerations, including the potential impact of regulations like the Consumer Duty on business valuations and sale processes. Delegates expressed a desire for clearer guidance from the FCA on navigating these challenges during M&A activity.
Key takeaways:
- Identify your business strengths and weaknesses to preserve value during the sale process
- Conduct due diligence on potential buyers to understand their financial strength, culture, and integration plans
- Secure key financial advisers with updated employment contracts to protect against attrition risks
- Manage client expectations about the sale or acquisition early in the process
- Ensure ownership documentation, property leases, and personal assets are in order
- Determine your deal deadlines and non-negotiables before entering negotiations
- Understand the allocation of risks, liabilities, and indemnities in the sale contract
- Consider obtaining professional indemnity run-off cover to mitigate liabilities
