By Debbie Dry, Group Acquisitions & Integrations Director
Before you speak to a single buyer, you should be able to answer four sets of questions: what you actually want from a sale, what your firm looks like from the outside, what you’re not willing to trade, and what shape of deal fits your answers. Principals who work through these first run better processes and end up with fewer regrets.
I say this having sat across the table from a great many principals over 25 years. The unhappy outcomes I’ve seen almost never came down to price. They came from sellers who started the process before they knew what they wanted, and discovered it halfway through, when the cost of changing course was highest.
What do you actually want?
Most principals say “to sell the business”. Push on that and it splits into quite different ambitions.
Do you want to stop working, or to stop owning? Those aren’t the same thing. Plenty of principals love advising and hate being a compliance officer, an IT department and an HR function. For them, the right deal keeps them advising for years inside someone else’s infrastructure. For others, the point is a full stop: hand over well and go.
When do you want to be done? “Two or three years” and “five to ten years” lead to different buyers and different structures. Neither is wrong. Be honest about which one you mean, and test whether your family agrees with your answer.
And what’s the money actually for? Retirement income is a different goal from de-risking a balance sheet that’s tied up in one business, which is different again from funding whatever you do next. The answer changes how much weight you put on cash at completion versus money paid later, and it’s better worked out before the offers arrive than during them. The mechanics are in how IFA deal structures work.
What does your firm look like from the outside?
You know your firm from the inside: the relationships, the history, the loyalty. A buyer sees a different object, and it pays to look at your firm through their eyes before they do.
How much of your revenue is recurring, and can you evidence the ongoing service behind it? What do your client demographics look like, and how much of the asset base is likely to be drawn down or pass to the next generation within ten years? How concentrated is the firm in you personally? If the answer to “who do your top 30 clients call” is “me”, that’s the single biggest discount factor on your value, and also the most fixable one, given time.
What would a file review find? Not in theory. If a buyer’s compliance team pulled 20 client files next month, what would they see? And is there anything in the firm’s history, complaints, past advice areas such as DB transfers, old product books, that you’d rather explain on your terms early than have discovered late?
None of these questions is comfortable. All of them will be asked eventually. The principals who ask them of themselves a year or two early go into a sale with answers instead of apologies, and usually with a better firm. What is an IFA business worth covers how these factors translate into price.
What are you not willing to trade?
Every sale involves trade-offs. The question is which ones you can live with, and you want to know your answer before a spreadsheet is pushed across the table.
Some principals care most about their clients’ experience: the same faces, the same phone number, no sudden change in service or charges. Some care most about their team, people who have been with them for decades and were promised, implicitly or explicitly, that they’d be looked after. Some care about the firm’s name above the door in a town where that name has meant something for 30 years. And some care most about the certainty of the proceeds.
You can rarely get all four at once. The buyer offering the most up front is often the one planning the deepest integration, and the buyer who promises to preserve everything may load more of the price into the transition years. Once you know your own ranking, the question stops being which offer is biggest and becomes which one costs you least on the things you said mattered.
Whatever your ranking, ask every buyer the same direct questions about brand, team, charges and service continuity, and ask for the answers in writing. The differences between buyer types are real, and described in choosing a buyer for your IFA firm.
What deal shape follows from your answers?
Once you know what you want, what you’re selling and what you won’t trade, the shape of the right deal starts to draw itself.
A principal who wants out in two years, with clients handed to a well-resourced team, is describing a fairly conventional sale with a structured handover. A principal who wants capital now but intends to advise for another seven years is describing something closer to a partnership: the questions then are about autonomy, support, and what the buyer’s platform actually does for their clients. A principal whose firm is heavily dependent on them should expect more of the price to sit in deferred or retention-linked payments, and can either accept that or spend two years reducing the dependency first.
This is also the point to take advice: an accountant on tax and timing, a solicitor with advice-sector deal experience, possibly a corporate finance adviser. The full sequence, from preparation through due diligence to FCA approval, is set out in the step-by-step guide to selling an IFA practice.
One last question.
Would you be at peace if, two years after completion, you bumped into your longest-standing client in the supermarket?
It sounds sentimental. It’s actually the most practical test I know. Principals who can picture that conversation going well have usually chosen the right buyer and the right structure. Principals who flinch at the thought already know something they haven’t yet admitted to themselves. Almost everything in this article is a way of getting to that answer before signing rather than after.
Frequently asked questions.
When should I start thinking about selling my firm? Earlier than feels natural: ideally two to three years before you want to transact. Preparation time improves both the firm and the terms, and some value drivers, like reducing the firm’s dependency on you, only move slowly.
Should I talk to one buyer or several? Several, at least at the start. Even if you have a strong instinct about the right home, comparing two or three serious conversations gives you reference points on price, structure and culture that you can’t get any other way.
Do I need to decide between retiring and continuing before I start? You need a working answer, because it determines which buyers are even relevant. It can evolve. But “I’ll see what they offer” hands the framing of your own future to the other side of the table.
What if my firm is not ready to sell? That’s a finding, not a failure. A year or two spent improving recurring-revenue evidence, file quality and team depth typically repays itself in both price and process. Start with the areas a buyer’s due diligence would probe first.
Debbie Dry is Group Acquisitions & Integrations Director at Loyal North. She has spent more than 25 years in UK wealth management M&A and was previously Integration Director at Succession Wealth, where she oversaw 57 acquisitions.
Loyal North partners with established UK financial planning firms whose principals are planning the next chapter. An initial conversation is confidential and without obligation: For IFA principals.
This article is general information, not financial, legal or tax advice. Take professional advice on your own circumstances.