TRANSITION TALK

Impact of Consolidation

Posted by David Grau Sr., JD on May 8, 2019 1:09:44 PM

impact_blogbanner

 

There has been a fair amount of talk over the past decades about consolidation in the financial services industry. Most of the white papers and articles addressing this concept have presented it in a negative light as though it signals the end of the lifestyle practices that dot the landscape in this profession. Industry regulation, growth, technology, fee compression, competition, and aging advisors forced smaller practices to consolidate just to survive. At least that was the working theory.

As the original organizers of the open marketplace for independent advisors seeking to sell or to acquire, we have a slightly different perspective on consolidation; we view it in a very positive light. Consolidation looks very different than what the prognosticators laid out decades ago. From our vantage point of working with businesses below $2 billion in AUM, we’ve observed the industry is indeed experiencing some consolidation, but not only due to acquisitions or roll-ups by companies like Focus Financial, United Capital, or Dynasty. The consolidation that we see every day is owners of stronger, sustainable enterprises acquiring smaller, one-generational books and practices.

Viewed in this light, how better to look after 250 clients or households when a single-owner advisory practice nears retirement than to find a very similarly structured business that can step in, take over, and provide for the staff members as well? This process works for the buyers, the sellers, and, most importantly, the clients.

Read More

Topics: Multi-Generational Ownership, Organizational Structure, Business Growth, M&A, Sustainability, Trends in Transactions Study

Coming Soon! Trends in Transactions and Valuation Study

Posted by FP Transitions on May 2, 2019 2:37:22 PM

trends_blogbanner

Our new Trends in Transactions and Valuation Study includes expert insight, commentary, and predictions for the state of the financial services industry. The study dives into last year’s M&A numbers and examines how industry businesses and their values have evolved over the last five years.

This comprehensive, 50-page study features:

Read More

Topics: Business Growth, M&A, Business Value

Shared Risk / Shared Reward - Financing Your Deal

Posted by David Grau Sr., JD on Mar 29, 2018 1:58:00 PM

sharedriskreward_banner

Setting up and agreeing to proper and reasonable payment terms is an essential part of the selling or acquisition process. The following questions are common for both buyer and seller when it comes to deal structuring, especially in regard to financing the transaction:

  • What types of financing are available?
  • What is seller financing?
  • How are payments structured to promote post-closing co-operation and motivation for both parties?
  • Are there contingencies to the payment of the full purchase price?
  • Does client attrition affect the final purchase price?

SELLER FINANCING

Underlying virtually every acquisition is the assumption that the seller will offer some kind of financing to support the transaction. There are four primary types of seller financing, the last three of which include contingencies that may alter the final purchase price.

  1. A basic promissory note
  2. An adjustable or performance-based promissory note
  3. An earn-out arrangement
  4. A revenue sharing or fee-splitting agreement

Seller financing is less a matter of the sufficiency of a buyer’s cash reserves and more the basic payment structure technique that recognizes the importance of keeping the seller motivated to help with post-closing client retention. Post-closing seller motivation and support is critical in a transaction that involves a relationship-based business.

Read More

Topics: M&A, Financing, Buying & Selling

The Dangers of Napkin Negotiations

Posted by Jeanie O'Reilly Northcutt on Nov 2, 2016 12:55:10 PM

moneyroll_banner.jpg

The financial services industry is a personable one. Professional networking and client prospecting depend on your charisma and ability to connect beyond surface pleasantries. But when it comes to selling your business, it’s important to keep your cards close to your chest.

It’s very easy to get excited about the prospect of transitioning your business and moving forward in life–especially, when you’re talking with a colleague you’ve known for years. However, the excitement can cloud your ability to think through details and maintain a healthy level of confidentiality. It’s important to avoid casual negotiations and hashing out deals without proper documentation.

These casual conversations–also referred to as handshake agreements, or napkin negotiations–can lead to a lot of problems, including a loss of realized value. 

SHARKS IN THE WATER

The first issue that could arise from the casual mention that you’re even thinking about selling your business is the influx of phone calls or visits from people who want to buy. It’s like blood in the water. And while buyers flocking to you may seem like a boon, it can quickly become overwhelming. Without an efficient screening system, it becomes time consuming and difficult to sift through the phone calls to find serious and qualified candidates, let alone the person who fits your ideal criteria to take over your business. You also make yourself vulnerable to predatory buyers.

Read More

Topics: Selling Your Practice, Acquisition, M&A, Deal Structure, Buying & Selling

The M in M&A

Posted by FP Transitions on Oct 26, 2016 9:10:40 AM

mergers_banner.jpg

M&A. Mergers & Acquisitions. Everyone’s favorite topic. Understandably so when one of the fastest ways to grow is to acquire, and as such add exponentially more clients (and assets) to your business in one fell swoop.

What about mergers though? Often mergers are lumped in with acquisition talk and statistics. Their role and effect on an advisor’s future, however, is much different than an outright sale or purchase.

Our new book, “Buying, Selling, and Valuing Financial Practices–The M&A Guide,” written by FP Transitions president David Grau Sr., JD, clarifies that mergers are, legally speaking, “the joining together of previously separate companies into a single entity.” And unlike an acquisition / sale, a merger also means that the owners of the previously separate companies remain in the newly formed entity and retain some amount of ownership stake. 

Mergers can be an important part of exit and growth strategies alike. Consider this example from the book:

Read More

Topics: Selling Your Practice, Acquisition, Business Growth, M&A, Buying & Selling, Mergers

CASE STUDY: Open Market Redemption

Posted by FP Transitions on Sep 27, 2016 9:40:43 AM

Open Market Redemption for a Confident Seller - Case Study

When it comes to finding the right buyer, the prospective buyer pool need not be large if it is filled with candidates that fit your criteria and are willing to meet your terms. 

Our newest case study follows the story of one seller who was left at the proverbial altar by a qualified buyer, then found a better match–and an above market offer–using the FP Transitions open market system.

After being burned by an independently found buyer, this seller turned to the FP open market, determined not to be taken advantage of again.

Read More

Topics: Acquisition, M&A, Buying & Selling

NEW BOOK - Now Available

Posted by FP Transitions on Aug 31, 2016 10:42:55 AM

Our new book Buying, Selling, & Valuing Financial Practices - The FP Transitions M&A Guide is now available. Order your copy here, and watch the video below to find out why our President & Founder, David Grau Sr., JD decided to [literally] write the book on Mergers & Acquisitions for the financial services industry.

Read More

Topics: Acquisition, M&A, Business Value, Buying & Selling, "Buying, Selling, and Valuing Financial Practices", Published

M&A Data Release

Posted by FP Transitions on Jul 1, 2016 11:29:09 AM

At FP Transitions, we’ve been valuing financial advisory practices and facilitating their transitions on the open market for almost two decades. In that time we’ve amassed the industry’s largest, most comprehensive database of financial advisor data. This year’s data tells the story of a robust Mergers & Acquisitions market despite industry uncertainties. 

MA_Data_blogthumb-420495-edited.png

This year’s M&A webcast looks back over the last five years of advisor data to bring you a new perspective on the M&A market and the future of your business. Preview the presenation below, or click here to watch the full video. 

Read More

Topics: Succession Planning, Selling Your Practice, M&A, State of the Market, Exit Planning

Industry Headwinds [NEW WEBCAST]

Posted by FP Transitions on Jun 9, 2016 1:56:37 PM

In an industry where the ability to adapt is crucial, it speaks volumes that the current volatility is making many financial professionals nervous. New standards, laws, regulators, and even technology threaten to make a huge impact on single-owner practices and multi-generational firms alike.

Practices who have planned ahead and spent time bolstering their revenue and enterprise strengths are likely to fare better, and those have put off building are bound to feel the effects of these headwinds more acutely.

In our newest webcast, FP Transitions founder and CEO, David Grau Sr., J.D., along with our VP of Research and Analytics, Eric Leeper, discuss:

Read More

Topics: Succession Planning, Selling Your Practice, M&A, State of the Market, Exit Planning

CASE STUDY: Acquisition Wrap Up

Posted by FP Transitions on Mar 24, 2016 9:13:11 AM

sucessful_deal_handshake.jpg

“In the acquisition marketplace, the impression you create can make or break your success. The market is competitive, the industry is tightly regulated, and decisions can be made based on intangible matching criteria and gut feeling. This is the real story of three buyers, and how their various approaches to the transaction ultimately led one to the winner’s circle.”

Read More

Topics: Acquisition, M&A, Buying & Selling

Blog Comments