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An Unsolicited Offer to Buy: Is It Time?

An Unsolicited Offer to Buy: Is It Time?

The market for financial services practices has changed. 20 years ago, people didn’t see resale value in a financial planning practice. When an advisor retired, they just hoped they’d find someone who would agree to take over their book. As the industry matured, however, sales started taking place. It wasn’t easy – there were no standards for valuation or deal terms, no strategies for client retention, few financing options, and concerns about liability.

These days, those issues have mostly been resolved, providing for a real marketplace and more competitive prices for practices. It’s a seller’s market, and in our open marketplace, sellers often field fifty or more inquiries for every practice listing. Practices are being purchased by regional and national firms, RIAs, banks, and private equity groups. There are many more options for an advisor upon retirement than existed twenty years ago.

[Related: The Role Social Media Can Play to Increase the Value of Your Business]

Exploring your options.

What if you receive an unsolicited inquiry–either a letter in the mail, an office visit, or a phone call? If your business plans do not include selling, you can file the offer away for the future in a file that may well include other such letters. On the other hand, maybe the offer sparks your interest to learn more about what options you have in the marketplace. Selling what you have built can be a good strategy, when the time and circumstances are right.

Perhaps you’ve already made the decision to sell, and are ready to talk to some qualified suitors. If you have received an unsolicited inquiry or offer, the chances are strong that there are other possible buyers out there - and, more to the point, better qualified buyers. Allow yourself the time to explore your choices and understand how the M&A process works before jumping into a sale.

Even if you aren’t planning to sell for several more years, you shouldn't necessarily dismiss a recent offer. Deals can take a while to put together. Also, remember the adage, “Sell on the way up.” Don’t wait for the economy to start going south, for client attrition to set in, or for a new and more onerous set of regulations to push you over the edge.

Work with a professional.

The best way to achieve the greatest financial reward for what you have built - while finding the best fit for your clients and staff - is to work with an M&A consultant. Experienced buyers tell us that they prefer working with a seller using a skilled, non-advocate intermediary because it makes for a smoother, more professional, and more predictable process and outcome.

You will only sell your business once, which means it is very difficult to master the process and skills necessary to realize fair market value while shepherding your clients into capable hands. Most buyers, however, have done this many times before. As a potential seller, you need your interest to be protected so that you can participate on a level playing field. Also, consider that calls, meetings, and due diligence requests can consume a great deal of time that you could otherwise be spending on your business and clients. Having guidance through the process will save you time and money.

[Related: Advice On Building Trust From Business Advisors Who've Been There]

Things to consider.

When the time comes to entertain offers to buy your practice, consider these key questions:

  • Does the offer align with your most recent market-based valuation?
  • Does it make sense to compare this to other opportunities in the marketplace?
  • Could bank financing be used to improve the offer and reduce your risk?
  • What are the tax implications of the deal?
  • Will your office staff and advisors be part of the deal?
  • Is this the best cultural fit for your clients?
  • Does the buyer share your investment philosophy, fee schedule, and client communication style?
  • Do you know the partners and history of the purchasing firm? What type of buyer are they?
  • Will you have to change broker dealers?
  • Will you be selling the entire business or book? Or are you considering a partial sale?
  • Would you consider a merger or a “sell-and-stay” instead of an outright sale?

[Related: Innovation Defined: 3 Keys to Future Proofing Your Business]

Next steps.

After an initial discussion, you may decide it’s not the deal for you, or not the right time. Either way, this can still be a good exercise. Talking with a buyer will give you insight into what options are available to you in your region and with your business model. It can also help you understand what you need to work on when the time to sell does come. The information you discover can help shape your exit or growth plans - or both. If now is the right time, you’ll want to start a conversation with the prospective buyer(s) that covers some of the topics above. The next step is signing non-disclosure agreements and starting the due diligence process.

Remember that the right buyer isn’t always - or even usually - the highest bidder or the first through the door. The right buyer will be the one who provides the best cultural match to ensure a smooth transition and a solid future for you, your staff, and your clients.


Kathryn Taylor is a Succession Program Manager with FP Transitions. She has over twenty years of experience in the financial services sector, and has worked with financial advisors, RIAs, and Broker Dealers to assist with transitions and continuity and succession planning.

Have more questions? Follow up with the expert herself.