Merging and succession

4 min read

A serendipitous offer solves succession planning issues

Two planning businesses - one with two principals going through maternity leave and caring for young children and another with two principals looking to start thinking of retirement in the next 5-10 years - decided that their differences make them perfect partners for a merger. The result was Sto-ry Wealth Management.

Financial planning business Thinc Wealth had two principals - Sarah Leslie and Kara Treeby. Sarah was just returning from maternity leave and needing flexible hours and Kara was about to take her second maternity leave. Their clients needed to be looked after and they needed outside help.

They decided that making an approach to another established planning business in a different phase of their evolution could solve both businesses’ future plans.

For Anne Graham, and her husband David, their business had just gone through a massive change. After leaving a practice she had been at for more than 15 years she had gone out on her own - this meant writing a strategic business plan, finding premises, moving, renaming and branding the prac-tice and informing all her clients. The new business - Sigma Wealth - had a lot of thought put into it and a new practice meant a rethink.

“The succession plan was the decider,” Ms Graham says. “We knew the people, we’d known them for eight years or so, and we were in the same dealer group so the pain points were minimised. We also had a similar client base, similar target market and similar values.”

Timing is everything

The approach by Sarah and Kara came as a surprise. “They approached us, they’d been looking at Kara’s pregnancy and Sarah’s return from maternity leave and wondering how to manage. Alt-hough it was something not expected, it made sense. Their business was mainly working with peo-ple planning for retirement and retirees, like ours, and it was a good opportunity to lock in a plan for the long-term future,” Anne says.

Although the approach came unexpectedly, once it was decided it had to be acted on swiftly.
“Kara was pregnant and we wanted it sorted before the baby was born,” Anne says. “We talked be-fore Christmas and the deal was completed in the first week of April. The baby was born mid- April – one day after the business had its’ first board meeting.

The whole process was completed in less than six months.

Jumping the hurdles

We had to decide where the new business would be, the business name, we had to value the busi-nesses and consider resources.

The structure was also an issue. So at the end of the day, after careful planning, it was decided that it would be a merger of sorts using existing structures - Ms Graham’s practice would purchase the assets of the other practice in exchange for shares in the new business. All partners are sharehold-ers in the new business.

“Our dealer group Securitor was very helpful in recommending an external valuer to value each business at arms’ length, with full disclosure on both businesses - the valuer proposed the value of the combined businesses together with appropriate equity for each partner,” Anne says.

The long term attraction was that the numbers stacked up, there were synergies saving on costs, but the main reason for the deal was the succession planning.

For the next five years, with the new partners having children and young families and choosing to work part time hours, we should continue working as we are setting the foundation for the business. After five years, David Graham (Anne’s husband and business partner) would like to reduce his hours and consider other options.

How will it all work

Deciding how everyone fits into a new or merged business is always tricky. Through the initial inter-views, Anne says she had an idea on the roles that they needed to fill and then hired an external HR consultant to come in and work out specifics and roles and job descriptions.

Profiling was also undertaken to establish everyone’s strengths and weaknesses.

Anne was made CEO of the new business and part of her job is to ensure all partners understand the role of financial planner and directors/owners are quite separate.

One role was made redundant as a result of the merger.

“Our operating rhythms of the two businesses are different but now that they’re under the same roof they will start to work as one,” Anne says.

Formalising the procedures

According to Anne, it was essential to formalise and clarify the procedures - from engaging an HR professional, valuer and making sure ongoing financials were fine.

“The clients have been great. We communicated a lot that Thinc Wealth clients were moving and changing our names. We had an end of financial year event for all clients, so they could meet other clients and the team at Story Wealth. It’s always a comfort to put a face to a name”

Pleasantly surprised

“Both businesses did due diligence on the files, processes and compliance history and because we were from the same dealer group there were many similarities,” Anne says.

“I think it will be fantastic. The team is so good, the pleasantest surprise is just how well the team is working together, cooperative, non-competitive, and they’ve helped each other. There’s lots of goodwill and when we start our new roles it will really hum.”

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This Information current as at 27 September 2017.

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