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When is the right time to sell your Financial Services business?

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Deciding on the best time to sell a Financial Services business involves multiple, often conflicting factors to consider. Numerous challenges face businesses today; inflation, supply chain problems, environmental factors and the threat of future tax increases are all factors that can either stall a business owner’s hand to sell, or spur it on. Despite the challenges “the M&A market remains incredibly active. With the recent Budget Announcement sharing the details for the years ahead, many business owners are now looking to the future and considering what to do next”(Insider media limited: 2023 when is a good time to sell your business?). Increased private equity interest in the UK Wealth Management markets has spurred a consistent flow of acquisition activity Nationally. Regional practices are committed to merging or acquiring niche businesses to compliment organic growth, and larger PE-backed entities are keen to diversify, access new markets and geographies in the hopes of generating attractive returns.

With 6/10 Wealth Management business owners nearing the retirement threshold, it’s easy to see where prospective supply can meet acquisition demand, but is here ever really an opportunistic time to consider your exit strategy?

One aspect for potential sellers to focus on is the current trajectory of their business: “buyers prefer to purchase businesses with rising revenue projections rather than businesses in decline. As clients age, it’s important to remember their client lifetime value decreases. Assets under management for older clientele tend to shrink over time, as they are no longer in the accumulation phase and assets are withdrawn as clients move on.” (LPL Financial: how to know it’s time to sell your practice 2022)Therefore, growth aside, in order to even maintain the value of a business, new clients and assets must be added regularly. While it may be tempting for business owners to focus on nurturing existing clients and processes, this has the potential to result in decreasing the value of a business when it’s time to sell.

From a human perspective, business owners often enjoy their job having spent considerable time building a business involving clients and friends they’re eager to continue to serve. Thankfully, selling a practice doesn’t automatically mean the next step is retirement. Structuring the right deal means business owners can opt for ‘sell-and-stay’ or ‘sell-and-service’ models, allowing them to remain at whatever level of involvement they’re happy with, while shifting the main bulk of responsibility to the buyer.

Here are four common factors that can influence timing:

Financial Performance

As mentioned, businesses experiencing strong financial performance may be more attractive to potential buyers and command a higher price, but this isn’t to suggest a lower-performing business may be more difficult to sell or command a lower price. Rather, trajectory sells. Forbes advise monitoring business growth metrics through the measuring of sales revenue metrics, gross profit margins, net cash flow metrics, turn-over rates and cost per hire (Forbes: assess your business with these performance management metrics). This allows for a clearer picture of both where a business is, financially, as well as where it’s going.

Market Conditions

Economic and market-specific conditions can also impact timing of a business sale. Within UK Wealth Management it’s clear to see a vested interest from Global PE entering into the market, giving exiting owners a wider range of options to consider, and scope for greater interest and competition which undoubtedly impacts valuation.

Industry Trends

The Financial Services profession is going through an increased period of consolidation, and it may be more advantageous for business owners to consider their options whilst there’s strategic interest in their location, niche vertical or client demographics.

While a market saturated with businesses looking to sell may not bode well for valuation, it does allow for thorough comparable analysis. Giving “an observable value for a business, based on what rival or similar companies are worth at present” (AXA: how to value your small business), comparable analysis means business owners looking to sell optimise what can often be a difficult process of finding a realistic starting figure.

Personal Goals

Above all else, the timing has to be right for the individual business and owner, as well as shareholders, team and clients. In a recent article, the Financial Times stress the importance of “focussing on what a deal offers, not just on how much it offers” (Financial times: 2023 how to sell your business). While closing on the best possible price is ideal, selling at the right time is best; and given the ideal time varies depending on market outlooks, business trajectory and the personal situations of business owners, the ‘right’ time to sell will always be specific to the individual.

Take time to understand why you’re selling, as well as what your goals are following the sale, and you’ll gain a better insight into when that right time is for you and your business.

With so much to consider, it can be beneficial therefore to work closely with an experienced professional able to offer impartiality, insight, and market intelligence to help you determine the best timing for a sale.

Find out what’s next for your business, contact Financial Services Mergers & Acquisitions specialist James Salmon at IDEX Consulting.


AXA: how to value your small business

Financial times: 2023 how to sell your business

Forbes: assess your business with these performance management metrics

Insider media limited: 2023 when is a good time to sell your business?

LPL Financial: how to know it’s time to sell your practice 2022