Consolidation and succession planning continue to shape the future of the advice industry. Acquirers and advice firms embarking on this process can learn something by thinking like a construction manager: hard hat on, plans in hand and eyes wide open.
Major construction projects often face unexpected delays, sometimes due to unforeseen discoveries beneath the surface, whether that’s unexplained remains or hidden cables.
While some surprises are unavoidable, many setbacks stem from inadequate planning and due diligence. The same is true for mergers and acquisitions (M&A), where skipping foundational steps can lead to frustrating and costly complications later on.
Thankfully, in the advice industry, we don’t have to worry about finding actual skeletons, but there are definitely lessons we can take from the construction world.
At the recent PIMFA M&A summit event I was genuinely surprised when the FCA speaker revealed that some ‘Change in Control’ applications are submitted before basic due diligence is complete, and sometimes without signatures.
These examples do not show consolidators in a good light and could cause concern among advisers who may already feel trepidation
This rush to submit applications and reserve a place in the FCA’s queue is worrying, as it risks undermining the integrity of the process and the reputation of the profession.
Clearly, these examples do not show consolidators in a good light and could cause concern among advisers who may already feel trepidation when considering an acquisition as a genuine option for succession planning.
Fortunately, this is by no means the only way to go about an acquisition. But how can advisers get a good gauge on whether an acquirer has a thorough process, or whether they just want to jump ahead and rush things through?
What’s the rush?
For any advice firm considering a sale, cultural alignment and mutual understanding should be non-negotiable.
A credible acquirer will invest time in face-to-face engagement, seeking to understand your firm’s ethos, values, and client relationship – not just your balance sheet.
Substantial time and effort must be invested up front by the acquirer, demonstrated by a genuine interest in the culture of the firm and building a proper appreciation of the motivations behind a possible sale.
You need to understand the motivations of the acquirer, their culture, ethics and service
It takes much more than a Teams call or two. This is equally important if you’re the seller.
You need to understand the motivations of the acquirer, their culture, ethics and service. Do these align well with your business, and, most importantly, your clients?
The conversations that take place should ensure everything is on the table from the beginning, providing a clear picture of whether you’re a genuinely good fit for each other.
Doing so will reduce the load further down the line, because there will be no surprises and everyone will have clear expectations of one another.
Seller preparation
Just as a conversation flows both ways, the firm which is selling will benefit from proactive planning and preparation, even at early stages of the process.
For example, any diligent acquirer will have questions about your commitment to ensuring good client outcomes in line with Consumer Duty. Demonstrating readiness, especially around embedding Consumer Duty, can instill confidence.
Having clear, accessible data on client outcomes signals professionalism and commitment and provides immediate confidence.
If it takes you days and days to pull it all together, this could create the wrong impression about the ethos and practices of your firm.
Picture a pyramid
Back to construction for a moment. Pyramids have been around for thousands of years and have weathered many storms. Their strength is in no small part due to their solid foundation.
Like the pyramids, enduring success in M&A also needs to be built on solid foundations
As advice firms, a solid foundation is critical when building engagement, trust and loyalty with clients.
We achieve this by spending time getting to know clients and by putting time and energy into understanding their hopes, dreams and aspirations. We all understand that this helps to ensure any recommendation is absolutely right for the client.
Like the pyramids, enduring success in M&A also needs to be built on solid foundations.
Investing time upfront to understand motivations, culture, and client service alignment is just as critical as financial and regulatory due diligence. It’s the groundwork that ensures long-term success and stability.
Jo Swain is chief risk officer at Clifton Asset Management
