Buying a book

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Dec 15, 2008 10:41 am

Can anyone give me some basic ranges on what a book would or should sell for in this market?

Here's what I'm looking at.  $48M aum, 78% Fee based, 104 clients, 14 account for 58% of the book. Selling FA is not retiring, just wants to exit and leave the business. He built it from scratch over 12 years.  Book was $71M in July this year!!  This is what concerns me

I just want some ideas before I get talking too seriously.

Thanks

Dec 15, 2008 11:27 am
burtonfinancial1:

Can anyone give me some basic ranges on what a book would or should sell for in this market?

Here's what I'm looking at.  $48M aum, 78% Fee based, 104 clients, 14 account for 58% of the book. Selling FA is not retiring, just wants to exit and leave the business. He built it from scratch over 12 years.  Book was $71M in July this year!!  This is what concerns me

I just want some ideas before I get talking too seriously.

Thanks

 
Why does this concern you?  There's obviously been a little correction in the market since July.  He's down about 32%, so it depends on what he's invested in.  Do you know the make-up of the book?
 
You should consider this a good thing...his book is on sale.  Say he sells it at 2 times the T12, you're obviously not going to buy it at July's levels and he may not sell it at today's level. 
 
If you do buy it, it might make it a decent time to re-assess what the clients have...
Dec 15, 2008 11:41 am


Thanks for the guidance.  We're sitting down later this week to take a deeper dive on the book. He's hinting he may sell at 1.5 times revenue. I'm sort of looking at it based on that being a decent starting point.

Dec 15, 2008 11:57 am
burtonfinancial1:


Thanks for the guidance.  We're sitting down later this week to take a deeper dive on the book. He's hinting he may sell at 1.5 times revenue. I'm sort of looking at it based on that being a decent starting point.



 
Does his book look similar to yours as far as the types of products and business model you have?
 
Also, is there any proprietary things you wouldn't be able to move?  You might also find out if he's had conversations with some of the clients if they've panicked and want to bail out. 
Dec 15, 2008 1:10 pm
burtonfinancial1:


Thanks for the guidance.  We're sitting down later this week to take a deeper dive on the book. He's hinting he may sell at 1.5 times revenue. I'm sort of looking at it based on that being a decent starting point.

 
If you can get it at 1.5 times revenue at todays values, that's a steal.  I am guessing he has around 500K in annualized revenue today, but t-12 of around 600-700K?
 
Also, why would he want to exit the business if he is not retiring?  Have you asked him?  At that level of revenue, and something he built from scratch, seems strange to leave the business.
Dec 15, 2008 1:14 pm

Also, make sure there is some client retention guarantee in place.

Dec 15, 2008 1:35 pm

how is the deal going to be structured, can you workout a payment plan over 2-3years? will he personaly intruduce you to his top clients? can you reposition those assets from fee based accounts into a real value added product like VA

Dec 15, 2008 5:15 pm

Make sure there is a transition plan in place.

Dec 18, 2008 9:43 am

BurtFin,

 
Where did you find someone willing/wanting to sell their book?