Clarify the legal position
Start by reviewing the legal agreements that underpin your business. Do clients contract with you as an individual or with the business? Has the goodwill been properly transferred from the shareholders to the company? These questions matter because they determine who legally owns the client book, and therefore, who has the right to sell it.
In many cases, business owners may have started as sole traders or partnerships and later incorporated. If that transition wasn’t documented properly, there could be ambiguity over who owns the goodwill.
Similarly, where the company has bought the goodwill from one or more shareholders, you’ll need evidence of that transaction and confirmation that the company now holds the rights to those client relationships.
Consider self-employed advisers
If your business model includes self-employed advisers, you’ll need to look at the contracts in place with them. Are they introducing clients to the firm or retaining ownership themselves? Do they have restrictive covenants, and are those enforceable? Buyers will want to know whether those clients can be transferred smoothly, or if there’s a risk they could leave with the adviser after the sale.
Without clear contractual terms, buyers may be hesitant or may structure the deal to reflect the risk. This could mean part of the consideration is deferred or linked to client retention. Taking the time to clarify adviser agreements now will make the business far more attractive and reduce the likelihood of surprises later on.
Implications for deal structure
Ownership of clients has a direct impact on how an acquisition is structured.
If it’s clear that the company owns all client relationships and there are no outstanding claims, a share sale may be straightforward.
If, however, the situation is more complex, the buyer may prefer an asset purchase or staged approach. For example, if goodwill is still held by an individual or there’s uncertainty around adviser-owned clients.
By reviewing and resolving any ownership issues early, you can increase your negotiating power, reduce delays, and make the process far more efficient.
Get your documentation in order.
Before going to market, it’s worth conducting a legal and compliance check of all relevant agreements. Make sure everything is up to date, signed, and stored in an accessible format. This includes adviser contracts, shareholder agreements, and records of any goodwill transactions.
In an asset deal, this point becomes even more significant. Buyers will expect proof that the company, not individual advisers or shareholders, holds full rights to the goodwill and client relationships.
Cleaning up client agreements and adviser contracts well in advance removes uncertainty and strengthens your hand in negotiations.
Set yourself up for a clean sale
Buyers will carry out their own due diligence, but it’s better to pre-empt potential questions than be on the back foot during negotiations. Knowing exactly who owns what within the business shows professionalism, reduces uncertainty, and puts you in a stronger position when it comes to agreeing the terms of your exit.