When it comes to due diligence, ThinCats may conduct an operational review depending on business size and what has been done before.
“[We want] advisers that are locked in through a decent package, which is combined salary and bonus, but not highly sales driven.”
The lender also looks at the quality of the advisers, advice and the quality of the IFA’s platform(s).
“What I mean by that is: what is their regulatory umbrella like? Is it in-house or out? Either is fine but [it is about the quality]. What is their operational infrastructure? What is the sort of range of funds that they provide? And are they active in managing the client books, right?
“We always meet management and spend time with people. We may do an operational review depending on the size of the business and what's been done previously.
"We will always do financial due diligence."
For those looking to sell, Anand says IFAs need to understand what their proposition is to a debt provider, acquirer, or private equity backer.
This includes the quality of the book, the diversity of clients, platform and fund performance, and the churn of clients and advisers, to name but a few.
“Ultimately, if you're a decent business, what's your growth ambition and how are you growing? How do you get new clients?”
“There's always attrition, for all sorts of reasons, so that may or may not matter. If you're selling outright, and someone was willing to [acquire] your book as is, and they can grow it themselves, then that may matter a bit less.”
Ima Jackson-Obot is deputy features editor of FTAdviser
