Acquisitions: How they affect your clients

David Hesketh, group M&A manager at Perspective Financial Group, unravels the myths about what happens to clients, staff and stakeholders after a business has been acquired.

An adviser’s client base is the very lifeblood of their business and so it is understandable they are at the forefront of all our thoughts when a potential acquisition is being discussed. Any quality IFA owner will want to have a very clear idea about what happens to their clients and how they will be treated, should an acquisition take place.

We would have deep reservations about dealing with any business principal who did not place their clients at the heart of any decision they made about what happens to their business. The simple fact is we all need to ensure clients are treated with the upmost respect and provided with a continuous service proposition and offering that means they continue to keep their business with the practice.

Given the number of consolidator propositions and also the range of debate that encompasses IFA owners’ options leading up to RDR, then it seems obvious there will be some misleading information regarding what happens post-acquisition.

We believe it is vitally important we offer total transparency about how both the business and the clients will be treated which is why we always encourage vendors to chat openly with principals who have recently been acquired by us. It is, unfortunately, the nature of this business to find a degree of misconception and negativity regarding what will happen (if anything) post-acquisition and how the clients, staff and other stakeholders will be treated.

Clearly, there are a number of routes an acquired business can take and different consolidators and propositions will have their own way of doing business. However, to our mind there are two extremes, if you like, in terms of how the business and the clients could be treated following a purchase of a practice.

What might seem like the preferred option short-term for the owner and the business may well not be when they move further into the future, and therefore it is important to know what these options might be and how they can change over time. And of course, in all this, we must consider the options that work best for the client as opposed to what might only work for the owner and purchaser.

Little input

One extreme scenario would be to have a purchase approach which comes with very little input from the acquiring business. Essentially, this should mean very little change for the acquired practice and their clients – they will be allowed to continue doing what they have always done.

Now, some owners might relish this degree of autonomy and being completely ‘left alone’; they may see this as a tick in the right box in terms of the way they have conducted business to date and the way they have treated clients.

However, we have an ever-changing regulatory landscape, namely the RDR, which will impact the sector considerably and therefore all practices need to regularly re-visit the regulatory guidelines; even the most transitioned RDR practice will still have to continually review and make changes to the way they conduct themselves.

Therefore, leaving an acquired practice totally to their own devices in the lead up to RDR could present significant problems not just for the practice but also its clients. We want to have practices ready and able to trade post-RDR providing excellent, good value services for their clients while maximising profits, however this option will not guarantee it.

Looking at this option short-term an IFA practice owner may think this is the best choice but what about the service they will be able to provide into 2013 and beyond? What would be the consequences of not being able to provide an RDR-ready service?