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This article is the last installment in a multi-part series exploring the issues Jim Whiddon faced as he decided to sell his practice. To access all the articles in this series, please click on “more by the same author” in the left margin.
Whether you are moving forward with a merger or are still debating whether to do so, you must consider what will happen after you blend with another firm. Here are the three most important elements to keep in mind.
Internal communication
The level to which your employees will support your vision with a new partner depends on how well you communicate to them from the outset the reasons for the merger – not how you communicate with them once the transaction is complete. Getting this critical buy-in requires reaching out to them early.
By engaging your team’s resources in the vetting process, they become a safeguard against any defective logic or incomplete reasoning on your part. Your team’s input adds value over your own ideas when it comes to thinking through the various scenarios that may arise. And if you have been a good manager/entrepreneur, your people will have greater insight in many areas of your firm and can confirm or question your decision-making.
External communication
A host of regulations, procedures and policies will surround communicating your merger to current clients and to the general public. These will vary from firm to firm and from client to client. Advisors considering a merger should engage proper legal and compliance resources early on in the process to ensure all necessary provisions are met. Timing of communication is also important, because anything can happen before the closing documents are officially signed and delivered.
We all know client retention is a major issue that requires the utmost attention and strategy before the announcement is made publicly. Proper messaging is paramount. After all, you are taking this step as a fiduciary with your client’s best interest in mind. Therefore, you want to make sure you can clearly communicate the many advantages and benefits that will come their way as a result of the transaction. The fact that people generally have an aversion to change makes this a challenge, but one that can be easily managed if vigilant.
Initially, assess how to best engage each client individually – what medium does each person typically prefer? To cover your bases, three mediums of communication should be used. The first is a personal telephone call to every client. In each case, consider which elements and resources of the acquiring company that may be of particular interest to them. This personal contact goes a long way toward building confidence among your most important constituents – your clients – that you’ve acted in their best interest.
We started with our client advisory board, which is made up of 15-18 clients. They are the leaders amongst our client base and have graciously championed our cause for many years. This was done the day prior to the official closing date (once we had 99% confidence that all was in order and the deal would close). On closing day, we methodically contacted each client by phone. Naturally, we were unable to reach everyone, but within two to three days all had been advised of our decision.
Secondly, we sent an email by mid-afternoon on the day of the announcement. This included more details of the reasoning and realities of the new enterprise as well as the benefits our clients would soon reap from the new partnership.
Next, a hard copy of the email sent was mailed to each client’s home address from me – the CEO of the former company – followed in a few days by a letter from the acquiring company’s CEO.
Finally, we committed to having a face-to-face meeting with each client as soon as possible and scheduled an introductory event within 45 days to allow our clients to meet some of the key players at our new partner firm in person. We were eager to show and implement the exciting services brought on board by our new partner.
Technology, process and culture
One of the big advantages of combining forces with our suitor was the economy of scale they brought to the table. Any changes in computer programs, technology, documentation of processes and training take time to work through, but the effort has been a bit easier than expected in my circumstance. Every advisor’s situation in this regard will be different, but up-front due diligence in the area of technology is critical to discuss and settle before moving forward with a merger. It is tempting to look past the details as a deal looks imminent, but you must conduct the process thoroughly and give yourself every opportunity to confirm or deny the partnership before papers are signed.
My final advice is two-fold. Understand as a business owner that the seeds of any future transition must be sown sooner rather than later if you wish to make a change. The process of merging with another firm requires a minimum of six months – with nine to 18 months being more realistic – for a full decision process to run its course. Second, no book has had as much impact on building my firm as Michaela Gerber’s The E-Myth Revisited. Anyone looking to grow – and eventually sell—a business should obtain a copy of this important work and devour it more than once.
Among its lessons is the idea of running your business as an entrepreneur and not as a technician – as most professionals unfortunately do. This entrepreneurial vision will put you in a position to be successful in creating a marketable business enterprise. Gerber frames the discussion around making your business a “franchise-able” entity. Even if franchising is never your actual intention, thinking of your business in this way will bring to light important questions as you consider such a life-changing decision. I wish each of you the very best in all of your future endeavors.
James Whiddon, CFP, MSFS is a wealth advisor with Buckingham, an independent member of the BAM ALLIANCE. Buckingham provides wealth management for individuals, businesses, trusts, not-for-profits and retirement plans. He is the author of two books:Wealth Without WorryandThe Investing Revolutionaries.
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