Factors that influence valuation and their implications
Asset or Share Purchase/Sale
Different taxation principles apply that influence the costs to acquire and sell hence the overall valuation.
Profitability
Consistently profitable firms with a robust balance sheet will always command a premium valuation.
Client Age Demographics
Client portfolios in capital accumulation achieve higher valuations than the equivalent in drawdown.
Client Charging Structure
Must be at a market rate and offer commercial viability for ongoing servicing.
Client Service Proposition
Clarity, simplicity, and transparency, are important. The absence of structure damages value.
IT
The use of contemporary software tools and maintenance of orderly client records make for transparency, ease of access, analysis, accurate valuation, and post-sale integration.
Sell & Go
The sale of a client database and investment portfolio often leading to a retirement is typically valued using a multiple of recurring revenue.
Sell & Stay
The sale of a business as a going concern is typically valued using a multiple of ongoing annual profit/normalised EBITDA.
Geography
Clients located in or close to leading commercial centres make for ease of servicing and commercial viability.
Investment Proposition
Comparable alignment between vendor and acquirer models makes for ease of integration with minimum client disruption.
Aggregate Portfolio Size
Average investment portfolio (£) at commercially viable levels for sustainable client servicing.
Legacy Advice
Existing toxicity or potential liability from legacy advice will influence achievement of PI cover and premiums and hence valuation.
Attitude to High-Risk Product Promotion
Portfolios comprising disproportionate levels of High-Risk product promotion will achieve discounted valuations.