As the average age of practice owners in Canada edges past 55, retirement planning has taken on new urgency. Traditionally, retiring advisors would simply approach a neighbouring office and ask if they were interested in purchasing their client book. However, the landscape has shifted. With the move towards fee-based accounts, the valuation of practices has significantly increased — from roughly 0.5–1 times revenue in a non-recurring fee environment to as much as 2–4 times recurring revenue today.

This enhanced valuation has boosted seller confidence and attracted more advisors to seek expert help. Enter the era of business brokers and merger-and-acquisition (M&A) advisors. These professionals are playing an ever-important role in helping advisors navigate the sale of their practices. Their guidance ensures sellers receive a fair price while safeguarding the legacy and client relationships nurtured over years. Yet, their involvement raises important questions about fees: Who should pay them? And what value do these fees really represent?

Advice for sellers

The process of preparing your practice for sale is much like advising a client on their long-term investment goals — it all comes down to an exchange of value. The role an M&A professional plays is to support the sale process in four key ways:

  • Preparation: Optimizing revenue streams and strengthening team and support structures well ahead of the sale.
  • Buyer identification: Finding prospective buyers who share the seller’s vision and have the financial capability to ensure a smooth transition.
  • Negotiation: Establishing a favourable sale price and structuring the deal in a way that meets the seller’s objectives.
  • Transaction management: Guiding the deal through due diligence, legal documentation and ultimately closing.

This entire process can begin as early as two to five years before the sale, and usually takes three months to a year to complete. Research from Firmex in 2023 indicates that M&A advisors in Canada typically work on a “success-fee” basis — paid upon closing.

On average, these fees range from 6%–8% for deals valued around $5 million, 4%–6% for $10 million deals and 2%–4% for transactions between $20 million and $50 million. The seller’s fee depends largely on the advisor’s assessment of the work involved in achieving a successful sale.

Who should pay?

As interest in acquisitions grows — about 45% of Canadian practice owners are looking to expand by acquiring additional books of business — the balance of power has gradually shifted toward sellers.

This shift brings up the issue of fee allocation. If a buyer pays the fee, it might compromise the M&A professionals’ loyalty, potentially leading to conflicts during the negotiation.

In many cases, both parties engage their own advisors, ensuring that each retains a dedicated focus on their respective interests and goals.

For sellers aiming to recoup these costs, the simplest solution often lies in negotiating a higher purchase price. When a deal attracts significant interest, the increased sale value typically more than offsets any fees incurred.

Your life’s work

The decision to engage professional advice isn’t just about navigating fees. Advisors have built their practices through years of hard work and client commitment. As they approach retirement, ensuring that their legacy is preserved and that their life’s work continues to flourish becomes paramount.

By carefully engaging the right advice and negotiating fair terms, sellers can not only achieve a successful sale but also embark on the next chapter of their lives with confidence.

Ultimately, whether you’re a seasoned advisor planning your exit strategy or a buyer looking to expand, understanding the intricacies of practice valuation, M&A strategy and your business goals requires thoughtful consideration. Surround yourself with a dedicated team to help you navigate these complexities effectively.