Growing a Financial Planning Business through acquisitions.                              Experience and Theory.Listing and...
Introduction                                                                          For an acquisition to be possible a ...
Food for thought.        For a buyer the Primary decisions are.        •       Why am I considering to buy a firm        •...
Buyers Vision• Do you have one• What is it?      – Merge with another local company and stop.      – Buy a company that ad...
Why Buy ?•   Faster growth•   Leverage operational resources•   Acquire skills and or knowledge•   Broaden demographics of...
Criteria & Considerations• How big a book do you want to buy?• What geography are you comfortable with?        •     Techn...
Process StepsDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
Seek and SearchIt is unlikely the first opportunity will meet your criteria    so having a pipeline is a key success facto...
Introductions• Initial Introductions and statement of interest.• Important to establish a rapport.• This is a sales pitch ...
CDA•   Confidential Disclosure Agreement.•   Mutual – you want protection as much as they do.•   If Possible get a 3 way, ...
Fact Find• High level review of Sellers Book of Business.      – Asset types      – Client ages      – Asset structures [V...
Valuation• Factors affecting Valuation.      –    Markets served and Practice structure      –    Sole Proprietor, Partner...
Firm V Founder    •    Value is derived from a measure of revenues/income and         a factor [X].                       ...
Firm V Founder     •    Is your firm “Institutionalized” ?     •    If you as the founder/seller were to leave          to...
Factors affecting                 valuationEach facet of a firm can add value orit can detract. It is key to understand   ...
Provisional Offer• Valuation and Terms.      – Valuation models are many      – Terms and Structure, be fair, be realistic...
Due Diligence•   Reg S&P – understand and beware.•   Firms performance v market.•   Technology adoption and data integrity...
Confirmed OfferAssuming all is well after due Diligence.•Confirm offer and initiate APA contract drafting.•Expect 3-5 iter...
Execution•   Expect the unexpected. Don’t Panic.•   Allocate resources internally.•   Setting client expectations is essen...
Execution• Letter from seller to clients      – Calls and meetings with top 20%      – Transition paperwork packet•   Lett...
Value progression                     5Multiple Expansion                     1                           200             ...
Profit Scales with Size                                                           Gains in Efficiency                     ...
Risks/Mitigation Risk                                                                   Mitigation Expansion complexities ...
Conclusion  • The financial services industry is consolidating.  • Growth by acquisition is a viable growth    strategy.  ...
IntroductionFounded in 2012 by Allen Duck and David Cunningham.•Allen has a 25+ year career in business most recently acti...
Thank youwww.eighty20advisors.comwww.eighty20exchange.com  970.325.3820 Office   970.412.6759 Cell
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Growing through acquisition_Eighty20_Advisors

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Deciding to buy an existing practice as a strategic growth initiative can be very rewarding and a rapid way to grow a revenue base. Planning and preparing are essential for a successful outcome. This PPT tries to outline the process of finding a suitable candidate firm as well as walk through the stages ad steps between and initial meeting and a signed contract. Good luck if this is a direction you are considering - keep pragmatism and analysis in front of enthusiasm and desire and you can be very successful.

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Growing through acquisition_Eighty20_Advisors

  1. 1. Growing a Financial Planning Business through acquisitions. Experience and Theory.Listing and Brokerage services for Buyers and Sellers of financial services practices.Platform for recruiters and applicants providing exposure and access to positions withingrowing firms.www.eighty20exchange.comConsulting, Business Development, Practice Efficiency and Succession Plan preparation.www.eighty20advisors.com
  2. 2. Introduction For an acquisition to be possible a buyer and a seller must agree on terms. Is your counter party one of the four ? Most deals have a deferred component and require a longer relationship with the buyer/seller.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  3. 3. Food for thought. For a buyer the Primary decisions are. • Why am I considering to buy a firm • When would be a good time to take on the risk • What can I afford to pay and how • Who should I target to buy For a seller the primary decisions are: • When should I retire • Who can I sell to • What is the business worth • Why am I retiringDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  4. 4. Buyers Vision• Do you have one• What is it? – Merge with another local company and stop. – Buy a company that adds skills to my current practice. – Buy assets and consolidate in one location. – Acquire multiple practices and create a multi $100M AUM business operating in the financial services industry.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  5. 5. Why Buy ?• Faster growth• Leverage operational resources• Acquire skills and or knowledge• Broaden demographics of aggregate book – Average client age etc…• Capitalize on economies of scale – payouts• Consider your own exit strategy and expectations.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  6. 6. Criteria & Considerations• How big a book do you want to buy?• What geography are you comfortable with? • Technology is a consideration.• Are you comfortable with added employees? • Good planners are not always good managers.• What is your current practice good at?• Are you looking for more of the same client types?• Are you trying to add a particular skill set?• What is your current operational capacity?• What is your funding capability? Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  7. 7. Process StepsDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  8. 8. Seek and SearchIt is unlikely the first opportunity will meet your criteria so having a pipeline is a key success factor.• Existing BD/GA/IMO.• Business brokers.• Specialist brokers.• CPA, Lawyers etc.• Other Industry participants.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  9. 9. Introductions• Initial Introductions and statement of interest.• Important to establish a rapport.• This is a sales pitch to a point of the seller making a commitment to disclose.• Philosophical match in YOUR mind??Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  10. 10. CDA• Confidential Disclosure Agreement.• Mutual – you want protection as much as they do.• If Possible get a 3 way, seller-buyer-BD.• Experience has shown the seller will NOT submit data for pre-registration until deals are signed making the transition process more complicated.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  11. 11. Fact Find• High level review of Sellers Book of Business. – Asset types – Client ages – Asset structures [VA, surrenders etc] – Income history – Income streams – Income projectionsDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  12. 12. Valuation• Factors affecting Valuation. – Markets served and Practice structure – Sole Proprietor, Partnership or Inc. – Customers and demographics – Income structure and streams – Technology adoption and data integrity – Measurement of profitability – Firms financial history – Systemized operations or Ad hoc – Suitability of buyer [Are they similar to you?]Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  13. 13. Firm V Founder • Value is derived from a measure of revenues/income and a factor [X]. Value = X * Revenue/Income • Understand the associated risk in using “X” is crucial to both buyer and seller ue ven Re TimeDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  14. 14. Firm V Founder • Is your firm “Institutionalized” ? • If you as the founder/seller were to leave tomorrow would the revenues be immediately Un-stable and irreparably impacted? Founder Stable FirmDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  15. 15. Factors affecting valuationEach facet of a firm can add value orit can detract. It is key to understand Other business assetsthat the overall firm value is aconstituent of many parts and each Staffshould be measured in a valuationprocess. Technology and data integrity Average age of clients Assets and structure Non recurring revenue Recurring revenue -VE 2x 1x 0 1x 2x +VE Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  16. 16. Provisional Offer• Valuation and Terms. – Valuation models are many – Terms and Structure, be fair, be realistic. – Include a “Claw Back” for assets lost and incentive for asset growth.• If accepted – draft Letter of Intent. – Offer confirmed “subject to….”Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  17. 17. Due Diligence• Reg S&P – understand and beware.• Firms performance v market.• Technology adoption and data integrity.• Business management in general.• Demographics.• Operational expenses.• Consistency of financials.• Client count and revenue distribution [Pareto]• Meet and greet key staff.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  18. 18. Confirmed OfferAssuming all is well after due Diligence.•Confirm offer and initiate APA contract drafting.•Expect 3-5 iterations of docs.•Close.•Now the work begins….Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  19. 19. Execution• Expect the unexpected. Don’t Panic.• Allocate resources internally.• Setting client expectations is essential.• COBD, NAF, AIM +++ for every account. – No Bulk transfers.• Timely client responses are essential. – Cash flow depends on them.• Plan, Prepare and Pursue.• Bring in short term resources.• Meet and greet key clients.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  20. 20. Execution• Letter from seller to clients – Calls and meetings with top 20% – Transition paperwork packet• Letter of introduction from buyer• Calls, calls, calls.• Thank you letter• 4-6 months out – follow up and questionaire.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  21. 21. Value progression 5Multiple Expansion 1 200 400 600 800 1000 Total Book ($M)Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  22. 22. Profit Scales with Size Gains in Efficiency Revenue Growth Income$ Expenses projected Time/AUM aggregtedDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  23. 23. Risks/Mitigation Risk Mitigation Expansion complexities cause Partition the on-going customer loss of customer base care and the integration team Acquired customer base is lost Retain the existing manager through the transfer process through financial incentives for a (industry average 91% retained) measured period. 4-12 months. Integration costs squeeze cash Budget for and regularly review flows with investors. Market Collapse No investment immuneDo not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  24. 24. Conclusion • The financial services industry is consolidating. • Growth by acquisition is a viable growth strategy. • Significant challenges exist but diligence and execution planning can mitigate the risks. • Returns can be substantial.Do not reproduce without prior consent. Copyright © 2000-2012 Eighty20 Advisors, LLC. All rights reserved
  25. 25. IntroductionFounded in 2012 by Allen Duck and David Cunningham.•Allen has a 25+ year career in business most recently acting COO for anRIA in PA – headed the acquisition strategy.•Founding board member for CPG, the succession engine within CIR.•Author and speaker on industry trends and dynamics in the successionspace.•David has a long career in business 40+ years, creating 6 separatecompanies and multiple successful exits.•Experienced in fund raising and business development.•Eighty20 Advisors genesis was a quantified recognition that the financialservices industry has a significant age bias, fragmented service modelsand is lacking a natural regenerative dynamic.•The firms objective is to bridge the void between the retiring advisors,those qualified to buy, and lastly, out reach to the next generation.
  26. 26. Thank youwww.eighty20advisors.comwww.eighty20exchange.com 970.325.3820 Office 970.412.6759 Cell

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