How to Value, Buy, or Sell a Financial Advisory Practice: A Manual on Mergers, Acquisitions, and Transition Planning

349 Pages·2006·3.42 MB·English

by  Mark C. Tibergien

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How to
Value, Buy, or Sell
a Financial-Advisory
Practice
ALSO BY MARK TIBERGIEN
1 (WITH REBECCA POMERING)
2
Practice Made Perfect: The Discipline of
3 Business Management for Financial Advisers
4
5 ALSO AVAILABLE FROM BLOOMBERG PRESS
6
Virtual-Office Tools for a High-Margin Practice: How Client-Centered
7 Financial Advisers Can Cut Paperwork, Overhead, and Wasted Hours
8 by David J. Drucker and Joel P. Bruckenstein
9
The New Fiduciary Standard: The 27 Prudent Investment
10
Practices for Financial Advisers, Trustees, and Plan Sponsors
11
by Tim Hatton, CFP, CIMA, AIF
12
In cooperation with the Foundation for Fiduciary Studies
13
14 Deena Katz on Practice Management:
15 For Financial Advisers, Planners, and Wealth Managers
16 by Deena B. Katz
17
Deena Katz’s Tools and Templates for Your Practice:
18
For Financial Advisers, Planners, and Wealth Managers
19
by Deena B. Katz
20
21 Building a High-End Financial Services Practice: Proven Techniques for
22 Planners, Wealth Managers, and Other Advisers
23 by Cliff Oberlin and Jill Powers
24
In Search of the Perfect Model: The Distinctive Business Strategies
25
of Leading Financial Planners
26
by Mary Rowland
27
28
A complete list of our titles is available at
29
www.bloomberg.com/books
30
31
32
ATTENTION CORPORATIONS
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34 THIS BOOK IS AVAILABLE for bulk purchase at special discounts.
Special editions or chapter reprints can also be customized to
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specifications. For information, please e-mail Bloomberg Press,
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phone [phone].
How to
Value, Buy, or Sell
a Financial-Advisory
Practice
B
A Manual on Mergers, Acquisitions,
and Transition Planning
MARK C. TIBERGIEN
and
OWEN DAHL
BLOOMBERG PRESS
NEW YORK
© 2006 by Moss Adams LLP. All rights reserved. Protected under the Berne Convention.
Printed in the United States of America. No part of this book may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photo-
copying, recording, or otherwise, without the prior written permission of the publisher except
in the case of brief quotations embodied in critical articles and reviews. For information, please
write: Permissions Department, Bloomberg Press, 731 Lexington Avenue, New York, NY 10022
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BLOOMBERG, BLOOMBERG LEGAL, BLOOMBERG MARKETS, BLOOMBERG
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BLOOMBERG TELEVISION, BLOOMBERG TERMINAL, and BLOOMBERG TRADE-
BOOK are trademarks and service marks of Bloomberg L.P. All rights reserved.
This publication contains the authors’ opinions and is designed to provide accurate and authori-
tative information. It is sold with the understanding that the authors, publisher, and Bloomberg
L.P. are not engaged in rendering legal, accounting, investment-planning, or other profes-
sional advice. The reader should seek the services of a qualified professional for such advice; the
authors, publisher, and Bloomberg L.P. cannot be held responsible for any loss incurred as a
result of specific investments or planning decisions made by the reader.
No ideas or examples offered in this book should be construed as legal advice. The authors
are not licensed or qualified to provide legal advice, and individuals or entities contemplating
a transaction should engage qualified legal counsel to review proposed transactions and to
draft all documents.
First edition published 2006
1 3 5 7 9 10 8 6 4 2
Library of Congress Cataloging-in-Publication Data
Tibergien, Mark C.
How to value, buy, or sell a financial-advisory practice : a manual on mergers, acquisi-
tions, and transition planning / Mark C. Tibergien and Owen Dahl. -- 1st ed.
p. cm.
Includes bibliographical references and index.
Summary: “A manual for financial advisers offering complete guidelines and techniques
on the key issues related to valuing practices for sale, mergers, acquisitions, partnership,
and transition planning. Special emphasis is given to ways to maximize and build value in
a practice and to vital information related to valuation approaches, the marketplace, nego-
tiations, due diligence, intermediaries, and buy-sell agreements”--Provided by publisher.
ISBN 1-57660-174-9 (alk. paper)
1. Financial planners--United States--Handbooks, manuals, etc. 2. Investment advi-
sors--United States--Handbooks, manuals, etc. 3. Business enterprises--Valuation--United
States--Handbooks, manuals, etc. 4. Sale of business enterprises--United States--Hand-
books, manuals, etc. 5. Business enterprises--United States--Purchasing--Handbooks,
manuals, etc. I. Dahl, Owen. II. Title.
HG179. 5. T527 2006
338.8'30243326--dc22
2006009550
Acquired by Jared Kieling
Edited by Mary Ann McGuigan
To my parents, Co and Marian Tibergien,
for indulging me just enough to pursue my dreams.
—MT
To Mom and Dad, for teaching me that
client service is not a concept, but a calling.
—OD
Contents
ACKNOWLEDGMENTS ix
INTRODUCTION xi
Part I Defining Value
1 Uncovering True Worth 3
2 Evaluating Fiscal Health 13
3 The Income Approach to Valuation 29
4 Other Approaches to Valuation 45
Part II Assessing Value
5 The Multiple-Partner Firm 55
6 The Solo Practitioner 79
Part III Coming to Terms
7 The Art of Negotiation 97
8 The Seller’s Perspective 107
9 The Buyer’s Perspective 121
10 Getting All the Way to Yes 141
Part IV Ounces of Prevention
11 Essentials of Due Diligence 161
12 Antidote to the Postmerger Meltdown 167
13 Making It Legal: A Sequence of Steps 179
Part V Inside Stories
14 Partnering: A Complex Choreography 197
15 Buy-Sell Agreements: The Path to Happier Endings 213
Part VI The Marketplace
16 Making the Match: Intermediaries 225
17 Finding the Ideal Buyer 235
18 Building Value: The Firm That Sells Itself 257
APPENDIX OF SAMPLE DOCUMENTS 277
INDEX 323
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Acknowledgments
A REFERENCE BOOK that tackles a complex topic requires the help of
many people, and How to Value, Buy, or Sell a Financial-Advisory
Practice was no different. We would like to acknowledge the valuable
guidance on legal issues we received from Tom Giachetti, who heads
the securities practice for the law firm of Stark & Stark in Princeton,
New Jersey; Dick Fohn, a partner at Moss Adams, for his guidance
on the tax issues; and Jet Wales, a principal at Moss Adams Capital,
for his insight and wisdom on the elements of negotiating and struc-
turing a transaction.
We owe a special thank-you to Mary Ann McGuigan, our editor
at Bloomberg Press, for the extraordinary patience she showed as we
attempted to pull our thoughts together and put them into words
and for her careful attention to how we phrased each thought.
Jennifer Long and Cathleen Mohr, two key administrative people
on our team at Moss Adams, also deserve recognition for their dili-
gence in herding us toward the goal and in checking our work and
challenging us on our wording at each stage.
Stephanie Rodriguez and Sarah Denkewalter made important
contributions to the development of our case studies and examples,
and we greatly appreciate their work.
We’ve benefited from working with many interesting clients
and friends in the business who have gone through complicated
transactions and who have provided us with important insights into
how best to approach each deal. Rusty Benton of Wealth Trust, Liz
Nesvold of Berkshire Capital, and Scott Roulston of Fairport Asset
Management have been especially helpful in sharing ideas with us, as
have the many participants in the Schwab Transition workshops.
David DeVoe who runs the Schwab Transition program helped
ix