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How is Covid-19 affecting the IFA M&A landscape?

The market is facing unprecedented times and this has, unsurprisingly, resulted in a number of questions as to what this means for the IFA space – particularly around IFA M&A. To help add a little clarity, last week Gunner & Co. reached out to the wider market and hosted a Q&A to answer the industry’s biggest questions and offer insight from the team.

Q: Are the next 6-12 months a bad time to exit and sell?

A: At Gunner & Co., we tend to work with firms for around two years before the actual sale, so this is a key question coming up from many clients – and there is no simple answer. We often find the best place to start is the target price the vendor has. If it was realistic three months ago, we can look to see if it can be achieved now. For deals likely to complete in the next six months, buyers are certainly being innovative to remain attractive to sellers. We have seen multiples increase in individual cases in the past few weeks, and mechanisms put in place to achieve growth in deferred payments, allowing sellers to share in the upside when markets improve.

For businesses struggling with operating in lockdown, a sell at this time could be a way of enabling client continuity and security – some buyers, such as Octopus Wealth are well placed to help clients remotely:

“At Octopus Wealth we have built a cloud based business that can advise clients remotely. We can help advisers who are finding it difficult to serve their clients by providing access to our technology to support their businesses, whilst also offering innovative solutions in the longer term to become part of our family, confident their clients are receiving the highest levels of service backed by a brand they know and trust.” Andrew McMillan, Founder of Octopus Wealth.

Some buyers are also factoring in all revenue rather than just recurring income for value calculations. However if you have just started the process of finding a suitable buyer, it’s unlikely the current market position will affect you, since the process tends can often take at least 12 months.

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