Deferrals of practice sales could drive oversupply
|
|
A current trend to defer the sale of planning businesses until the next bull market could result in an oversupply in the market in future years, according to consultant Kenyon Prendeville.
Director Alan Kenyon said many proprietors were deferring their exit due to the need to effectively manage client retention, but also in the belief that lost value could be regained with the next sustained bull market.
“Within that assumption lies the problem for the demand/supply equation, however, as the sellers are not alone in deferring the sale of their businesses.
“We may see the demand/supply equilibrium move from a sellers’ market to a buyers’ market in future years with this deferral and the growing age demographics of proprietors.”
Kenyon said there had not been a large number of business owners moving to sell their businesses and while this remains the situation, demand still significantly outweighs supply.
“However, older business owners may well decide to sell when markets improve significantly, and then will we see the supply and demand equilibrium change.
“This could see a movement of multiples downward, as well as a greater buyer focus on profit valuations, although this situation may still be three to five years away,” he said.
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
