Focus on the honeymoon when preparing to sell your firm

M&A activity in the UK advice market remains ultra-competitive.

We speak to firms that get several calls a week from interested parties looking to make or broker a deal with them. It can be a long way from that call to a deal being agreed and no matter how hard both parties work to cover all the bases, what feels like a good match can turn sour if some of the important intangibles are not considered.

Too often, the focus of the discovery process and negotiation is on getting the deal done, rather on what happens next.

Based on our annual study of more than 700 advisory firms from around the world, and the many conversations we have with people on both sides of the transaction, here are five things that are often not considered in enough detail when a deal is being negotiated:

Cultural fit, how will the two organisations sync?

Every newlywed hopes their parents and siblings will get on with their new in-laws, but usually this is left to chance chemistry.

Bringing two organisations together is also complex and loaded with downside risk. If the two sides do not share a common goal, not only will the immediate transition risk derailment, but it might also take years to overcome differences, if ever.

Among the considerations are: are the client propositions compatible, is the advice process in line, are the business priorities compatible? For example, is one firm focused on long-term financial planning and the other more on tactical advice? If there are differences, are they reconcilable? Can a compromise be made that both parties and their stakeholders can live with?

Investment philosophy.

Some firms believe the earth is round, others maintain it is flat. Some firms don’t care, as long as clients are happy with performance.

However you view the world, we find that many successful firms have a definitive, documented investment philosophy that is consistently applied across clients’ assets.

Bringing two firms together with distinct philosophies can be hard unless there is agreement on how to adapt or incorporate different ideas.

In addition to the fundamental market beliefs and how they are applied, consideration should be given to how focused on investment philosophy and strategy each firm is, how this influences the way the firm is run, and its clients’ expectations.

For example, a firm that values lifestyle planning and one that specialises in tactical investment advice will each have clients that value different things.

The transition timetable.

The pace at which any new relationship develops must suit both parties. One cannot rush the other, or drag its heels.