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Leveraging an Acquisition Consultant to Buy or Sell a Financial Advising Practice

Recently we shared a post discussing many avenues to explore when looking for a financial advisory practice to buy. Among those we discussed utilizing an acquisition services firm. Today we want to dive deeper and talk more about leveraging an acquisition consultant to buy or sell a financial advising practice.

Commonly referred to as “matchmakers” in the field, an Acquisition Consultant actively creates a platform to connect sellers with interested buyers. Typically, the consultant works on behalf of the seller, and provides a number of services that help guide the seller through the entire transaction, from soliciting and vetting buyers, to facilitating the transition. According to Anthony Whitbeck, CFP, CLU and CEO of Advisor Legacy, “It’s a very high-touch service. We do all the heavy lifting and ensure that we bring only serious buyers to the table.” To ensure that they only bring ready and committed buyers to the seller, Whitbeck and his team curate a pool of roughly 1,300 buyers, which they evaluate through a rigorous process that determines operational and cultural fit along with their commitment to purchase.

“We submit a notice to our network that a practice is available for sell,” Whitbeck explains. “They are provided everything they need to evaluate the business and submit an initial bid. This eliminates the tire kickers and gives us a serious pool of candidates to draw from.” Whitbeck goes on to say that they evaluate all interested buyers and work with the seller to identify a dozen or so for an initial phone interview. From there they narrow it down to one or two for a final, in-person interview with the seller. “We facilitate everything, including asking questions, handling negotiations, and preparing all legal documents.”

Not all “matchmaking” services are created equal, however. Often, they are nothing more than the equivalent of a bulletin board and lack the key support services that inform and guide both parties, particularly the seller, through the process. “Often this is the first time the seller is selling a business,” says Whitbeck. “They don’t have the knowledge or time needed to ensure a good outcome. That’s why we choose to represent the seller in the transaction.” Typically, the consultant represents the seller in exchange for a percentage of the selling price, usually 2-6%.

Even in instances where a buyer and a seller have already found each other, an acquisition consultant can still help. As an informed and experienced advisor, they can act on behalf of one or both parties to navigate all of the ins and outs of the process. In this situation the consultant typically works for a flat fee and helps to draw up all legal documents, facilitate negotiations, secure a sound valuation of the business, locate financing for the buyer, and assist the parties through the transition. “We call this turnkey dealmaking.” Says Whitbeck, who goes on to say that often neither party knows how to value the business, structure the deal, or handle the process. Occasionally they will have an experienced buyer, but the seller is usually a novice and needs help from a trusted advisor to competently complete the transaction.

There is tremendous value to both the buyer and seller in working with an acquisition consultant. Firstly, the consultant will either develop or bring in a creditable third party to develop a sound and valid valuation for the business. Not only does this valuation ensure that the price represented is truly what the business is worth, it is critical for securing financing. Also, not only does the consultant help draw up all legal documents, they also assist with the transition from beginning to end. This ensures that the seller does what is needed to hand off the business, without delaying their exit any longer than necessary.

When evaluating acquisition firms, look at the suite of services offered as well as their experience, accreditations, and track record matching sellers and buyers. As mentioned earlier, some firms only offer message board type services, so make sure they have all of the support services you need to guide you through every step of the transaction. Having an experienced third party manage the process ensures a good outcome for all, particularly the novice seller. Not only does the acquisition consultant keep things above board, they have access to key resources, such as financing from institutions like ours, that are critical for closing the deal.