“Internal management buyout or maybe an employee ownership trust - both of them require you to have a strong management team in place.
“They often also require the management or the employees to perhaps take out substantial debt at a variable interest rate, perhaps around 10 per cent and the people who are going to pay for that are the clients usually.”
Hill said the first thing his firm asks an adviser is if there is anyone in the business who can buy the firm.
“[This is because] the most important thing when you come to sell your business is not the cash, it is the culture,” he said. “One of the phrases we use is culture before cash.
“Make sure the way you look after your clients, the way you look after your staff, can be as mirrored as you can with the buying firm.”
Hill said there's a good litmus test for that to help understand whether the firm is suitable.
“If you can, find out how the buying firm treats its least paid member of staff because it's the staff who have to look after the clients.
“I always knew if I looked after my staff, the clients would be fine. If you find out how they look after the lowest paid member of staff, you're probably going to get a good view of how they work.
“The second thing is to work out how they treat the lowest clients in terms of the fee that they get from the clients.”
He explained that everyone could treat the clients who pay them the most really, really well but it's the ones who they pay the least that you want to see how they treat.
“You don't know what you don't know. I thought I knew how to exit and trust me I didn't at that time - that cost me good six figures whereas if I partnered with someone like myself, I would have saved myself a lot of grief.”
Meanwhile, MacNee added that he agreed looking for the right culture is essential and while he identified that, he argued there are also sellers who perhaps just want to “cane that valuation for all can be” and culture may be less important so in that case, the least paid employee might not be the best sort of metric.
He said: “One point on the management buyout, I think historically that it has been difficult and we can't get around the management challenges in having that successor managers identified but, without talking our own book, it's partly the reason why we developed our own succession solution.
