We routinely stress to potential clients the importance of taking external advice when they come to sell their business, as the buyer will (more often than not) be a fairly frequent acquirer and as such considerably more experienced at M&A than the seller.
But it is not only an issue of the specific advice one receives, but who is giving it and their own standing in the M&A marketplace.
On a current transaction, our client signed Heads of Agreement with a buyer and this contained a four-month exclusivity period, during which our client undertook not to engage in any discussions with other potential buyers. Protection like that is quite normal in deals of this size for a purchaser to commit to completing the deal.
Some two weeks later a new five-page exclusivity agreement from the buyer’s lawyers dropped into my inbox. I emailed the buyer saying our client had already signed an exclusivity as part of the HofT and that the new agreement was therefore both unnecessary and inappropriate. The response came back “it is now standard practice”. Not easy to argue against such a line given that exclusivity had already been agreed to, meaning our room for manoeuvre was restricted.
We responded saying of course we would sign the new exclusivity agreement. But adding that in the future IMAS would have to advise clients of this buyer’s excessively legalist approach to making transactions happen. Lo and behold, the buyer and their lawyers rapidly determined that the new exclusivity agreement was in fact not actually required.
We continue to use our leverage on behalf of clients throughout the sale negotiations and often this extends to some 2-3 years after completion, when earn-out payments become due. With the major shareholder of the acquired business often having retired, or about to retire, the ongoing management team can be reluctant to chivvy up the buyer (who is of course now their employer) into making the final payment or arguing a point. Our fee structure aligns us with the sellers, so we are directly incentivised to get involved and remind a buyer that their willingness to honour both the spirit and the letter of any earn-out is an important element in us being able to continue to recommend them as a quality buyer to the next client they might be relevant to.
Sellers advising themselves operate on a playing field that is tilted heavily against them. With a competent adviser that tilt is reduced. We believe our advice levels the playing field. Most buyers would admit that in fact we tilt it in favour of our clients.
Insurance
The summer lull in UK insurance M&A activity (announced basis) that we reported on July continued into August, with only eight new deals to report on this month, although as we noted last month, on a year-to-date basis the overall level of announced transactions is still running ahead of 2022. Deals in August were also mainly at the smaller end, with only one of the acquired businesses noted below employing more than 20 staff.
There was an above-average number of new transactions in the personal lines broking segment, with three new deals. Global Risk Partners announced that it had entered the pet insurance market with the acquisition of VetsMediCover, based in the West Midlands, with GRP noting that the acquired business will become part of its Insync Insurance business. In personal marine, Aston Lark (Howden) added to its existing platform (which includes Haven Knox-Johnston and Euromarine) with a deal for Curtis Marine, based in Portsmouth. In motor, Verex Insurance fell into administration during the month, with its business being acquired by Car Care Plan, part of AmTrust.
In commercial broking, there were four new deals to report on involving four of the ‘usual suspects’ as buyers. Ardonagh continued its recent run of new acquisitions in its Ardonagh Advisory segment with a deal for Sorvio Insurance Brokers in Salisbury. Partners& added NexGen Insurance Brokers in Kent. Seventeen Group acquired Mint Insurance Brokers in London (Mint was already an Appointed Representative of Seventeen’s James Hallam broking subsidiary). And Specialist Risk Group announced the acquisition of Cheshire Insurance Brokers, a broker with a particular expertise in arranging cover for recruitment agencies.
Finally, in the MGA segment, it was announced that bloodstock specialist David Ashby Underwriting has been acquired by Howden.
Investment
Deal flow announcements slowed during August as the holiday season was well underway. Nevertheless, several transactions involving financial advice firms were still announced, including Wren Sterling’s acquisition of Cornwall-based Stockdale & Co, and Evelyn Partners’ acquisition of Millen Capital. Two Nottingham-based advice firms were acquired during the month, with George Square purchasing rival firm Taylor McGill, adding a portfolio of 250 private clients and Progeny acquiring Fiscal Engineers, taking its AUA to £8bn. Loyal North increased its assets by £40m with the acquisition of Kent-based Paul Wallis Financial Solutions, while national advice firm LEBC went into administration and transferred its assets and personnel to the sister company, Aspira.
Among the IFA networks, Tenet announced its closure and appointed representatives were offered the chance to move to the Openwork Partnership, which could potentially see Tenet’s 170 firms, 360 advisers and £6bn of client assets transferring to Openwork. In a separate transaction, Tenet’s mortgage arm, TenetLime, which has 231 mortgage and protection advisers and 133 appointed representatives, was acquired by LSL Property Services in a deal worth £12.9m.
Elsewhere in the sector, Co-op Bank acquired Sainsburys’ mortgage portfolio, adding 3.5k clients and balances totalling £479m and Dark Star Asset Management acquired GWM London, the UK arm of a Swiss multi-family office.
*IMAS Corporate Finance LLP has been acquired by MarshBerry.
