6 in 10 Financial Planning bosses looking to exit

As business valuations rocket, 60% of Financial Planning firm owners are looking to exit the industry in the next three years, according to a new report.

Retirement was the key driver for sale intentions (61%), according to Gunner & Co’s annual survey.

Business valuations have jumped considerably, with businesses regularly selling for over 4X recurring income, up from an average of 3.4X in 2021, according to M&A broker Gunner & Co’s deal tracker data.

Almost four in 10 (38%) of Financial Planning firm owners said they were motivated to sell to 'future proof' their strategic plan, an increase from 34% in 2021.

Many were adopting longer-term succession planning leading to retirement (14%), realising capital to de-risk (17%) or selling part of the business to open the door to future growth.

Over three-quarters (76%) of the Financial Planning firm owners surveyed said succession planning formed a significant part of their strategic planning. Gunner & Co said this suggests many firms in the sector are approaching the tail end of their natural life cycles.

An outright external sale was the favoured route for the Financial Planning firm owners who responded to the survey, with 70% preferring this over a management buyout (11%).

Most said they would prefer to sell to smaller scale buyers. Two thirds (63%) said they would consider regional buyers and 37% would consider a small local option. In comparison 51% said they would consider selling their firm to a consolidator, up from 43% in 2021.

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For independent firms, only 15% would consider selling to a restricted buyer.

Two other factors that were deemed important when assessing a potential deal were price (62%) and alignment of client proposition (48%). Client charging structures were deemed least important with only 2% seeing it as important.

Louise Jeffreys, managing director of Gunner & Co, said: “With the growth in new entrant buyers and start ups, we may not see a significant decrease in the number of firms for some years to come.  That said, I would suspect looking over a 5+ year horizon, it is likely a smaller number of larger firms will dominate, as smaller businesses are either squeezed out due to operational pressures or exit for retirement reasons and mid-size acquirers merge to reach scale.

“Mergers, management buyouts and management buy-ins are notoriously hard to execute, despite often being an aspirational preference for business owners. Whilst they can afford the business a level of continuity a consolidator-style buyer can’t they are fraught with challenges around identifying the right successor(s), agreeing the value and fund raising.”

The total volume of Financial Planning firms decreased by 0.9% between 2016 and 2021.

Gunner & Co surveyed 106 Financial Planning firm owners in February

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