Q: How are deals ‘in play’ being affected? For instance, if you are selling and have appointed lawyers and have started due diligience?
A: There will likely be somewhere between 100-150 deals started before lockdown was enforced. There are three key impacts in our view: the commercial viability of the deal; the ability to complete DD and legals, and finally, the client communications.
Whilst previous answers look at buyers’ commercial stance, in terms of completing DD and the legal work, with good technology, both of these elements can be completed with little to no physical interaction.
Client communications can be a little more tricky. Deciding if this is the right time to share something like this with clients will depend on a couple of factors, for example, will the adviser be employed by the buying firm? Business owners should know how comfortable (or not) their clients are with their current financial situation and whether they would see a sale at this point as unsettling.
That said, almost all transactions take place where the buyer is bigger than the seller and some firms are taking the view that the buyer could potentially offer clients more resources, more access to information and potentially more security.
Q: Are lawyers increasing their fees or changing the way they charge given the current turmoil?
A: We asked a couple of solicitors to help answer this one:
Alex Canham of Herrington Carmichael: Despite the current turmoil I would not say that we’re seeing a shift in charging structures. We continue to offer a mix of fixed and capped fees, so if you have a clear deal structure, a fixed fee option should still be available. As for the level of fees, as a rule, I would not expect to see these increase. Fixed fees are usually determined by anticipating the level of work involved on the deal. So whilst some clients may need additional support, if the original deal stays the course then the fees should be as anticipated at the outset.
Andrew Bretherton of Freeths: A lot of our legal M&A work is charged at fixed fees based on a pre-agreed scope of work and time frame and we will not be increasing our fees in the current difficult circumstances. We are fully set up to work remotely and continue to complete deals for our clients. We expect there to be a significant drop off in M&A work for the next few weeks/months but believe that the IFA sector will bounce back strongly when things get back to normal.
We are in uncharted waters, both historically and economically, and with that comes uncertainty and challenges for the IFA space. But we are on standby at Gunner & Co. to do all we can to help alleviate any fears and offer our views.
About Louise Jeffreys
Louise Jeffreys is MD at Gunner & Co. Louise has extensive financial services M&A experience, having helped facilities numerous transactions in her role at Gunner & Co. Louise works with clients to define their exit strategies, helping individuals and businesses to understand their aspirations, and how that relates to current market conditions. Louise is always happy to offer input and insight when it comes to IFA M&A and can be contacted at Louise.jeffreys@gunnerandco.com
