The rise of the start-up acquirer

I’ve been talking a lot lately in conversations with clients about how much the buyer market has changed over the last 18 months – 24 months, and that has been predominantly led by the increasing number of ‘start-up’ buyers looking to enter the market.

Start up buyers and private equity investors are attracted to the stability of financial planning firms, the opportunity for growth through new business and market growth and the consolidation opportunities.  Today there is a perfect storm attracting these buyers.

Why does that matter you might say?  What’s interesting about these parties is that, by and large, they are looking to build partnerships with already successful firms.  They are looking at clean, innovative and entrepreneurial business owners, and offering a number of different elements to deals that weren’t possible in the past.

For example, if you have built the foundations of your business, are ready for serious growth but don’t have the capital behind you, this type of buyer could help.  They are very much looking to take a journey with business owners, typically allowing you to maintain sizeable stakes in the business. 

By taking on an equity partner, you typically get the benefit of being part of something bigger, with greater resource, knowledge and experience and often access to funding.  Both of which give your growth plans significantly more chance of coming to fruition.

Indeed, if you join a larger organisations growth journey, you also have the opportunity to be rewarded for growth of a much bigger entity.

We have seen business plans where sellers releasing a majority stake of equity, with a second capital event linked to group growth, where the final state sell off is targeted to be worth more than the initial capital event.- almost doubling the value of the business. 

If you are one of the 36% of respondents to our recent survey who said they would like to sell all or some of their business for longer-term succession planning purposes, this is a model worth exploring now.

If you would like to understand more about this segment of buyers contact one of the Gunner & Co. Brokers here.