MANY LEAD advisers find that business owners have mixed emotions when contemplating selling their business. There’s the excitement of the new lifestyle the cash will afford, and the extra time for hobbies or interests, but there’s also anxiety at the loss of a business they have spent a lifetime building. Sellers can also begin to question whether the cash they receive will compensate them for the loss of income from the business writes Adam Wilkins, Head of Brewin Dolphin’s Birmingham Office.
If these concerns are left unanswered, the willingness to sell can gradually erode and lead to the deal being cancelled. Lead advisers can find they have built up a substantial amount of work in progress that cannot be billed out at full rates with no completion fees to offset substantial time and costs already incurred. It does not take too many aborted deals to negatively affect a lead adviser’s profit margin.
So, why does shareholder sentiment change and how can one question help to identify this? From experience, Brewin Dolphin suggests some deals fall through because the seller discovers the estimated net proceeds from the sale will not fund their (semi) retirement plans or support reinvestment objectives. Having worked on the edge of corporate transactions for many years, Brewin Dolphin understands this problem and can help to mitigate it.
NEW PROPOSITION, NEW TOYS
For more than 250 years Brewin Dolphin has been helping its clients by managing their investments and planning their finances. Today, the firm is entrusted with £36.4bn of clients’ money. A new breed of wealth manager is emerging inside their business which broadens their traditional set of offerings more than ever before. The “old stockbroker” image held by much of the market has been turned upside down with the growth of its Financial Planning team, now comprising more than 100 planners who come equipped with some exciting new toys.
Their wealth managers now complement the services of lead advisers and their clients through all stages of a corporate deal – from marketing and due diligence right through to advising on investing the proceeds post-sale in the most tax-efficient manner. Their experience suggests they add most value when they are involved as early as possible in the exit process – and typically throughout the following three distinct phases.
1 – EARLY STAGES OF A DEAL
Brewin Dolphin says one simple question that needs to be asked of shareholders is: “What’s your magic number?” Many shareholders don’t know how much money they will need for a “lifestyle fund” following the sale of their company. Brewin Dolphin can help your clients clarify their thinking with cashflow forecasting software. They will talk in private to
shareholders about the lifestyle they would like by compiling a personal cash flow forecast that considers the shareholder’s assets and liabilities, including investments, pensions and debt, and helps inform how much they will need from the sale – the “magic number”. Their forecast can take into account deferred consideration, earn-outs and even account for reserves to cover warranties. It then displays in simple, but effective, graphic terms how long the net proceeds will last.
2 – PREPARING FOR A SALE
As lead advisers and their clients organise the business and its key assets for sale, Brewin Dolphin’s financial planners are on hand to provide advice and help by considering the effects pre-existing tax structures may have on a transaction and providing pensions advice. They can even source the right insurance products, shareholder protection and key person insurance.
3 – POST-COMPLETION
While many shareholders will reinvest in other ventures, Brewin Dolphin finds they will rarely put all their eggs in one basket and, therefore, need advice on how to invest at least a proportion of their wealth. Brewin Dolphin’s investment managers will establish a suitable investment strategy, based on the client’s personal circumstances, objectives and attitude to risk. They create bespoke portfolios to help clients achieve their goals – without the burden of the day-to-day running of their investments. When shareholders know their magic number in advance, they are more comfortable entering the deal arena and we see more deals complete.
For more information about finding your client’s magic number, contact the Birmingham Office on 0121 710 3500 or via email [email protected]
