External Succession

Selling your business to an external third party may be appropriate for Advisors who would like to exit their business in the near term and who seek to maximize their financial gain.

In seeking the right type of acquirer, you may want to consider the following three types of buyers. All of these have their various advantages and disadvantages:

Independent Advisors – most knowledgeable about your business model and easiest to integrate acquisitions due to similar cultures, however, access to financing and ability to pay top dollar is an issue.

Consolidator or Roll-ups – familiar with these types of transactions and valuations, however, may reduce independence of acquired firm and payment is often in the form of restricted stock with long-term holding periods.

Banks / CPA firms – ability to pay higher valuations, however, post-acquisition integration is more difficult due to unfamiliarity with advisor business models and lack of experience in integrating acquisitions. Often cross-selling synergies that make these transactions valuable are not realized due to cultural issues.

What is your preferred role after the sale? Do you want to remain as an employee? If so, how will you manage the transition from owner to employee?

Will you be able to transition all of your clients to the acquiring party? Any attrition in the client base may lower the value of the transaction.