54 mergers & acquisitions Professional services


related M&A on the rise Increased levels of mergers and acquisitions activity in the professional services sector has been seen in recent months, reports Thames Valley and Blackwater Valley-based law firm Herrington & Carmichael LLP. Alex Canham, senior solicitor in the firm’s corporate and commercial team, explains that the industry sectors have been varied, but include accountants, independent financial advisers and estate agents


The consolidation of firms seen across the independent financial adviser sector follows the Financial Conduct Authority’s 2012 Retail Distribution Review. However, it seems to be becoming more prevalent across the professional services sector as a whole, with firms appearing increasingly keen to make acquisitions to strengthen or consolidate their market position.


Canham says: “We are working with clients in the estate agency and lettings, financial services and accountancy sectors who have been buying businesses in order to increase revenue and benefit from streamlined administrative


functions and the associated cost savings.


"Firms also often recognise a potential to upsell products to the new client bank, but acquirers have to be mindful of matching the target’s client profile to their product offering to maximise such opportunities.


"We have also seen cases where clients working in regulated sectors have specifically targeted businesses that have desirable regulatory permissions, as it is felt that acquiring them can be quicker and more cost effective than applying for the regulatory permissions from scratch.


"Whatever the rationale for the


transaction, we encourage our clients who are considering making acquisitions in the professional services sector to assess and test the value of work in progress (particularly where it may be passive recurring income), and to consider how amenable the target businesses’ client bank is likely to be to change.


"This is important to ensure, as far as possible, that the business purchased is sustainable and will add the anticipated value going forward.”


Test the purchase price


Whatever the industry sector, it is important for purchasers of professional services businesses


Preparing your business for a merger


Shoosmiths’ corporate partner Adam Dowdney shares his experience on how to make sure that your business is in the best possible position to negotiate a merger


“Merging a business is always a complex process, so it’s important to get the right legal advice to not only facilitate the deal negotiations but also to advise on the financial, tax, real estate, intellectual property, employment and pensions law implications of the deal,“ warns Dowdney. “There is a lot at stake but with the right advice you can mitigate risk and complete a successful merger process.“


Dowdney recently advised the shareholders of ORION Clinical Services on its merger with Simbec Research. He comments: “This was a great example of how two companies can successfully combine their expertise to significantly strengthen their position in the market and expand their service offering.“


The benefits of merging are clear, it can be direct route to


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increasing market share, filling product gaps or expanding your existing customer base, but it’s a route that needs to be navigated carefully.


“When merging a business it’s important that any due diligence process is not just about finance and figures, but also about the management teams, staff and culture,“ explains Dowdney. “Make sure you are confident that you have


chosen the right target company and be prepared to find solutions to cultural challenges as early as possible or during the integration stage so that both companies can benefit from the synergies of the merger.“


If you think that a merger is the right option for your business then it’s important to make sure that your business is prepared:


• Protect your interests – A non-disclosure agreement should be signed early on in any talks with a potential merger partner


• Be realistic – your financial projections will be carefully analysed so don’t over or under estimate


• Good housekeeping – as part of the due diligence process


you will be required to submit contracts, corporate records, shareholder details and other important information so make sure that all files are complete and up-to-date


• Be objective – take a step back and look at where the real risks of the merger may lie


• Check if any third-party approvals are required – last minute consents for a change of control can delay the process so identify what is needed at the start and take swift action to obtain all relevant consents


• Get the right legal and other professional advice – It’s imperative that you receive the right advice to complete a successful deal. Our legal experts have a wealth of experience in advising on all aspects of mergers and most importantly getting the deal done with minimum disruption to your business operations.


to ensure they are able to test the purchase price over a period of time. This is often done by reference to client retention and conversion levels.


Canham comments: “Clawback provisions are common in acquisitions of professional services businesses, particularly independent financial advisers, to reduce the impact on the buyer of any client relationships that are not able to be successfully transitioned across to the buyer.”


Its breadth of knowledge and experience of professional services businesses means Herrington & Carmichael is well placed to assist professional services businesses with business sales and purchases in the Thames Valley and Blackwater Valley regions and beyond.


Details: Alex Canham 0118-9774045 alex.canham@herrington- carmichael.com www.herrington-carmichael.com


THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2015


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