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Top Seller Considerations for Internal Succession Plan Transactions

Top Seller Considerations for Internal Succession Plan Transactions

Internal deals typically involve a higher level of knowledge and awareness of how the practice is structured and operates among both transaction parties.

 


 

By Patrick Farrell
Investacorp President & CEO

Despite the return of market volatility, when it comes to independent financial advisor transactions, it continues to be a seller’s market, with buyers continuing to outstrip sellers by a wide margin.

While many of these transactions are between two advisors that are not part of the same practice, it is also not uncommon to see internal succession planning deals, which typically involve a senior advisor selling to someone who is already in his or her business.

In-House Upside

There is never a one-size-fits-all approach in terms of what kind of succession planning transaction works best for any given buyer or seller.

One advantage of internal succession planning deals is that these transactions typically involve a higher level of knowledge and awareness of how the practice is structured and operates among both transaction parties. A colleague who is part of an existing advisor team is keenly aware of how a seller from that same group has run their business, requiring much less effort to get up to speed than someone coming in from the outside.

For independent advisors who have decided to sell their business to an in-house advisor, there are certain top considerations to bear in mind.

Valuation Method

First, consider the valuation method that will be used to determine the sale price. At a high level, the two most common valuation methods are industry comparables and internal growth rate.

Industry comparables are popular because they remove a lot of complex math and opinion from the process, provided you can find a reliable source for the average price of similarly sized deals.

Continue reading the full editorial at WealthManagement.com.

 


 

For more information, please contact:

Leslie Vigil
Senior Vice President of Business Development
Investacorp, Inc.
O: 305-901-1825
LVigil@investacorp.com

 


 

For Financial Professional Use Only

2019-03-05T12:11:21+00:00March 5, 2019|