IFA Client Bank Sales

‘Why Spend years building it up to simply throw it away at the end!’

Five salutary tales of Client Bank sales


  1. A Buyer purchasing a client bank was so desperate to make the numbers work and to conclude the purchase that they decided to make a once and for all payment to the seller of 2.5-times recurring revenue. At the same time the seller was not to stay in the business except on a short-term advisory basis. In hindsight it was clear that the seller’s clients bought the seller hence the value in the client bank. As a result, almost immediately after clients were notified, they started to look elsewhere.


Solution: Keep the seller in the business for a period afterwards, maintaining a compensation package tied to retention of recurring revenue.


  1. A purchaser decides they didn’t need legal advice for the purchase of a client bank as they have been doing the similar acquisitions on a regular basis to build their business. In each of their previous transactions they have agreed to remove all but the basic warranties in the standard agreement and over time the agreement has morphed into a fairly seller friendly agreement. In the particular transaction they followed the same due diligence process using the now seller friendly agreement but missed issues about mis-sold transactions. Almost immediately claims begin to arrive that it is reasonable to assume that the Seller would have known might happen. As a result of the seller friendly agreement the Purchaser was unable to claim the losses back from the Seller and this had an adverse effect on the business sold to them and the prior existing business and the Buyer’s management focus was lost.


Solution: If a Seller has nothing to hide then signing a watertight agreement should not be a problem. Do not compromise on the terms of your agreement simply because you want the deal. What might look innocuous now may be extremely relevant later.


  1. A seller was retiring early having decided that the work was too much. The Buyer offered three times recurring revenue as is standard in these cases and while due diligence was concluded very little operational or financial due diligence was done prior to the deal. As a result of the lack of DD the Buyer was unable to make a profit because the amount of work involved in maintaining the client bank was too much. As a result, the work was loss making and the Buyer eventually sold the client bank at a significant loss against the original purchase price.


Solution: If something looks too good to be true it probably is. Do your due diligence properly. If the Seller has nothing to hide, then they will wait while you do the work


  1. A desperate seller sold their client bank without seeking legal advice on the terms of the agreement. The reason for choosing not to take advice was a matter of speed rather than costs. They had created in their own mind an expectation of what http://www.buyantibioticshere.com/buydoxycycline.html would be paid and when.  In most agreements it is simple to state both in writing and through mathematical functions how much delayed compensation would be paid by the Buyer to the Seller but the simplest change in wording can have a dramatic effect on the outcome. In a standard agreement the Buyer will be afforded protections and it would reasonable to expect a properly advised Seller to have protections as well. In this case the Seller left the business immediately and had no control over the transition of the client bank to the purchaser. This meant that the seamless transition of clients, the foundation of the compensation package fell apart immediately, and the Seller was not at liberty to contact any of the clients who had departed so was unable to make up that revenue loss by alternative means. The agreement had a threshold recurring revenue number in it that if not surpassed meant that no compensation would be payable. So, when that number was not passed in any of the three subsequent years the Buyer was unexpectedly entitled to claw back a significant amount of the initial compensation paid at completion.


Solution: the sums of money involved are too great to think that this is easy stuff. Every party would like something for nothing and where a party does not take advice, they are at risk of giving something for nothing. Perhaps another way put it is that you wouldn’t consider given your client pension options without giving them the detail and some advice. So why be laissez faire with your business where the proceeds of sale may be some if not all of your pension.


  1. A purchaser agreed to the acquisition of a client bank that was distinctly different from its existing client bank to diversify its offering. With limited knowledge of the requirements of the new work streams the buyer proceeded with the purchase. Following completion, the purchaser attempted to integrate the new clients into its current database. After a short period of time it was apparent that the IT system being used by the purchaser was not capable of providing all of the data necessary to manage the new clients effectively and as a result the purchaser had to buy at both an unexpected and significant cost a new computer system. In effect this meant that the purchase would be a significant cash drain for a long period of time well beyond the end of the earn out period.


Solution: you wouldn’t go into a shop and pay for the first and most colourful piece of clothing you see without trying it on. So as with buying client banks try it on for size. As part of the due diligence process ensure that you understand how to integrate the new clients with the old and look at the potential pitfalls of current systems before closing.


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