The Authoritative M&A Guide for Financial Advisors Buying, Selling, & Valuing Financial Practices shows you how to complete a sale or acquisition of a financial advisory practice and have both the buyer and seller walk away with the best possible terms. From the first pages of this unique book, buyers and sellers and merger partners will find detailed information that separately addresses each of their needs, issues and concerns. From bestselling author and industry influencer David Grau Sr. JD, this masterful guide takes you from the important basics of valuation to the finer points of deal structuring, due diligence, and legal matters, with a depth of coverage and strategic guidance that puts you in another league when you enter the M&A space. Complete with valuable tools, worksheets, and checklists on a companion website, no other resource enables you to: * Master the concepts of value and valuation and take this issue off the table early in the negotiation process * Utilize advanced deal structuring techniques including seller and bank financing strategies * Understand how to acquire a book, practice or business based on how it was built, and what it is capable of delivering in the years to come * Navigate the complexities of this highly-regulated profession to achieve consistently great results whether buying, selling, or merging Buying, Selling, & Valuing Financial Practices will ensure that you manage your M&A transaction properly and professionally, aided with the most powerful set of tools available anywhere in the industry, all designed to create a transaction where everyone wins buyer, seller, and clients.
Foreword xi Preface xv For Sellers xv For Buyers xvi Acknowledgments xix Chapter 1 The Basics You Need to Know 1 Avoiding the Critical Mistakes 1 Valuation: The Great Debate 4 Assessing What You Have Built (or Are Acquiring) 6 Who Is Selling? Transition Strategies by Ownership Level 11 Overcoming Attrition: Public Enemy No. 1 14 What Is Being Sold? 17 Organizing the Marketplace 20 Exit Plans versus Succession Plans versus Continuity Plans 23 The Planning Continuum 28 Chapter 2 Value and Valuation Fundamentals 31 An Overview 31 What Creates Value? 33 Standards of Value 35 Valuation Approaches and Methods 38 The Rule of Thumb Method of Valuation 46 Application of Standards and Approaches 48 Making Sense of It All 51 Who Is Qualified? (to Offer an Opinion of Value) 53 Valuations for Bank Financing 54 Chapter 3 Solving Valuation 57 The Blue Book Standard 57 Lessons Learned 58 A Value Calculation 60 How It Works 61 Recurring versus Nonrecurring Revenue 65 Assessing Transition Risk 66 Measuring Cash Flow Quality 68 Fixing the Fracture Lines 69 The Profitability Issue 71 Chapter 4 Building and Preserving Value toward the End of Your Career 75 1. Get a Position Fix 77 2. Focus on the M in M&A 78 3. Obtain a Formal, Third-Party Valuation 79 4. Understand the Impact of Terms and Taxes on Value 80 5. Consider Alternative Strategies: Sell and Stay Opportunities 81 6. Study Reliable Benchmarking Data 84 7. Create a Plan and a Definitive Timeline 85 8. Have a Backup Plan 86 9. Sell on the Way Up! 87 10. Focus on You 88 Chapter 5 Preparing to Sell 91 What s Your Plan? 92 Finding the Very Best Match 95 When to Sell: Timing That Final Step 98 In a Nutshell: How to Sell Your Book, Practice, or Business 101 The Listing Process 107 Making a Quick Decision to Sell 112 When Selling Isn t Selling 113 Ten Things Buyers Will Want to Know 115 Handling Key Employees during the Selling/Listing Process 116 Letting Go 118 Chapter 6 The Buyer s Perspective 119 A New Direction 119 If at First You Don t Succeed ... 121 Build a Base for Acquisition 122 What Sellers Will Want to Know 124 Understanding the Audition Process 126 Are You a Buyer or a Prospect? 133 Nontraditional Acquisition Strategies 134 Chapter 7 Deal Structuring: Payment Terms, Taxes, and Financing 143 Seller Financing 144 The Shared-Risk/Shared-Reward Concept 145 Performance-Based Promissory Notes 147 Earn-Out Arrangements 148 Revenue Sharing or Fee Splitting Arrangements 151 Earnest-Money Deposits 152 Down Payments 153 Basic Tax Strategies 154 Installment Sales 156 Asset-Based Sales/Acquisitions 157 Stock-Based Sales/Acquisitions 161 Bank Financing 164 The Mechanics of the Process 166 Blending Seller and Bank Financing Together 169 Acceleration Options 170 Working Capital Loans 171 Chapter 8 Due Diligence and Documentation 175 Conducting Due Diligence 176 Assembling and Managing Your Team 181 Advocacy versus Nonadvocacy Approach 183 Documenting the Transaction 184 Chapter 9 Key Legal Issues in the M&A Process 197 What Exactly Is Boilerplate ? 198 Reps and Warranties 199 Covenants and Conditions 202 Indemnification and Hold Harmless Clauses 207 Protections against Death or Disability 209 Default Provisions 210 Resolution of Conflicts 213 Basic (but Not Trivial) Legal Issues 215 Chapter 10 The Transition Plan 223 Regulatory Issues 224 Transferring Fee-Based Accounts 232 Setting Up for the Post-Closing Transition 233 E&O Insurance (Tail Coverage) 235 Sample Client Letters 236 Conclusion 247 Appendix: Sample Documents 249 About the Author 279 About the Website 281 Index 283
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