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Mergers aren't just about numbers...

If you work in Financial Services, you can't have failed to notice the number of Mergers & Acquisitions taking place between Financial Advice Businesses at present.

However, if you have not been close to the action, you might "reasonably assume" that the most important aspects of a transaction is:

  • The Numbers
  • The Assets Under Advice
  • The Multiples of Ongoing Fees or EBITDA
  • The Average Client Portfolio.

However, if you are close to the action, it becomes increasingly obvious that the most important aspect of making any Merger or Acquisition successful is the people fit.

At Paul Harper Search, we supported our first IFA acquisition within 12 months of our formation in 1999. I am delighted to say that it was successful, and the Managing Partner of the team we moved to is still at the acquiring company 20 years later. Over the years, acquisitions have been up and down, but they are certainly very busy at the moment.

We are so busy we decided to set up a separate division to handle Mergers & Acquisitions this year.

I mentioned people are important. Within the last couple of weeks, I have been talking to many Senior Directors who have been involved in both sides of the Mergers & Acquisitions that have taken place over the past two to three years. Not all of these acquisitions would be regarded as successful by the market (or indeed the companies that were involved) but all have provided those involved with a great learning experience.

What all the Directors involved have told me is that the most important aspect of any merger is integration of the people.

There have been numerous discussions about the change curve and the messaging involved in ensuring it works out well.

You see very few people who are involved in a merger who actually had a choice about it. Usually, the Senior Directors or Partners of the firm and the Business Owners have arranged the sale in relative secret, and often they will be exiting in the company within a couple of years with a significant seven or eight figure sum. In the meantime, the Directors who remain along with the Advisers, Paraplanners and Support Staff will be expected to deal with massive change (not to mention the clients). If the sale goes well, there will be significant cost savings of the enlarged group, but it will only go well if the people involved are fully engaged and “buy into” the merger.

The chances of a successful merger is massively enhanced if both companies focus on helping people to transition.

You should never underestimate the personal relationship between an Adviser and their client as many past companies have learned to their cost. If the Adviser is not happy and they choose to leave, there is a very good chance that, over time, the acquiring company will start see clients leave as well. On the other hand, if the Adviser is made welcome and supported in dealing with a change, it is highly likely that they will stay and ensure their clients are happy too.

So, my advice to anyone thinking of acquiring other firms is take the people very seriously, make sure you have got the right people in place to smooth the acquisition, and do not just focus on the numbers, but focus on having a very good Adviser Director and Operations Director to ensure your multi-million pound investment pays off.



Paul Harper is Managing Director of Paul Harper Search and Selection, a Financial Services Executive Search firm with 22 years’ experience of securing the best talent in the market for those who need it.