We’ve selected a handful of valuable questions raised during the webinar ‘Building Your Succession Strategy: Tax, Value, and Team Preparation’ and invited our expert speakers to provide their insights. Whether you joined us live or are catching up afterwards, we hope you find these insights useful as you plan your succession strategy.

Q: Valuation is 3.5x / 7x etc however Louise you indicated what are cherry sales.  That suggests the multiples are averages.  What are the multiples for cherries?

Answer from Alex: Yes! These are averages, made up of all sales of businesses that we’ve worked with and seen in the market.  

‘Cherry sales’ might attract a higher range of multiples, either recurring income or EBITDA/Adjusted profit, if it’s of large scale, and/or represents a great strategic fit or adds great synergies for a buyer.  

For example, if a buyer is seeking a new foothold in an area of the country where they’re not established, they may be willing to pay handsomely for a quality hub-size business which they can build out from. 

Other aspects to consider are the quality of a business from a buyer’s perspective. Which could include good profitability (30%+), vanilla (Low-risk and simple), HNW, longevity (e.g. IGP/Inter-Generational Planning), good data and tech, chartered, and compliant. It’s not about hitting every mark (no-one has an ugly baby!) but being reflective of your business from a buyers’ viewpoint. That’s where an agent with a view of the market and valuations will be helpful. 

Q: When starting to discuss the sale of a business, how important are NDAs?  Are they needed for every conversation, or just after a certain amount of detail is going to be provided?

Answer from Alex: Great question, we get this a lot. 

As your broker, we take confidentiality extremely seriously — which is why we always have a signed NDA in place before we speak to any potential buyer about your business. 

In the very early stages, we may explore interest in the market using anonymised details (for example, “a directly authorised firm with £XXm in assets under advice and a strong recurring revenue base”). At this point, there’s no mention of your name or any specifics that could identify your business, so no NDA is needed. 

But the moment a buyer expresses genuine interest and we’re ready to move into specific discussions, whether that’s sharing an Information Memorandum or talking about client demographics, staff, financials, or location, we won’t proceed without a fully signed NDA in place. 

This protects your confidentiality, your clients, and your team, and ensures that every serious party is committed to treating your information with discretion and professionalism. 

In short: 

  • General, anonymous market soundings — no NDA needed. 
  • Any specific conversation about your business — NDA will already be in place. 

You can trust that we manage this process carefully from day one. 

 

Q: My wife works in company as an adviser and owns 16% of shares (held since inception). Will she get BADR? (non-voting shares) 

Answer from Alex: I was initially hesitant to answer this seeming as it concerns tax advice, which we would not profess to be providing! However, HMRC is very clear (at least in this instance) over what a person needs to qualify for Business Asset Disposal Relief, or Entrepreneur’s relief as it was known, see below:  

“Spouses or civil partners are separate individuals and may each make a claim. They are each entitled to Business Asset Disposal Relief up to the maximum amount available for an individual, provided they each satisfy the relevant conditions for relief: 

If shares are not from an EMI (Enterprise Management Incentive)  

For at least 2 years before you sell your shares, the business must be a ‘personal company’. This means that you have at least 5% of both the: 

  • shares 
  • voting rights 

You must also be entitled to at least 5% of either: 

  • profits that are available for distribution and assets on winding up the company 
  • disposal proceeds if the company is sold” 

Source: https://www.gov.uk/business-asset-disposal-relief 

We’d interpret from this that an Officer/Director would need to have voting rights of at least 5% alongside an equal or greater share of the business. 

However,  we would strongly encourage you seek the counsel of a trusted tax adviser, like Hazlewoods, who will be able to help you structure your business in the most tax efficient manner. 

Q: How do I deal with the i4 and numerous mountain bikes that the firm owns? 

Answer from Gemma: I assume that the i4 and mountain bikes are used by the director/shareholders (rather than simply employees) and have been correctly declared on a P11D as benefits in kind.

If they need to be extracted from the company then you could just buy them off the company at market value. Or you might be able to do this via the director’s loan account (if there is a credit balance). The bikes in particular, if they are second hand, might have quite a low value.

Alternatively they could be removed on completion, which means that, broadly, you would agree that an amount of consideration equal to the market value of the car /bikes would be withheld by the purchaser in return for the car / bikes being transferred to you.

Q: If selling a business, I believe ”run off insurance” would be paid by the vendor, and does that not cover the buyer in terms of clients suing the buyer,  for bad advice in any form ? As the original firm / adviser , would then have the claim pushed back to them / and or the pi run off insurance would be activated ?

Answer from Dorian: This is generally covered within the warranties and indemnities in the Sale and purchase agreement – and run off cover is not always required – depends on the parties engaged in the transaction. It is generally put in place to protect the vendor from legacy claims after ceasing trade – liabilities which might otherwise have to be met from the buy-out proceeds during the buy-out period. A buyer may get peace of mind too (with any claim going against the insurance policy rather than the vendor who may still be in the business etc. If a deed poll arrangement is required by the FCA, this may also give the various parties peace of mind.

Q: How much is a sell side assessment for a 2 adviser firm and how big an impact does it make on price?

Answer from Dorian: This really depends on the agreed scope, nature and complexity of the firm etc. I would suggest a light touch review might be from £5k + vat, increasing to say £25k + vat for a more fulsome review. Happy to discuss and see what may work for your circumstances. 

Q: How many years’ bank accounts do buyers want in DD, normally re run off insurance?

Answer from Alex: Typically, a buyer will want to review at least the last three full years of financial accounts during due diligence, along with management accounts for the current year to date. This helps them assess the consistency and quality of earnings, client retention trends, recurring revenue stability, and any cost or margin pressures.

However, this is up to the buyer’s discretion, so it’s worth asking. If you want the opportunity to speak to different buyers in a no-pressure environment, we’re hosting a workshop in London in June, where you’ll have the opportunity to speak with buyers across the market spectrum at a round table, to ask these kinds of questions and more. You can sign up here.