Congratulations, you’ve found a financial advisor that is interesting in selling their book to you. Now the hard work begins as you must begin your due diligence and planning prior to closing the deal. If organized properly, both parties should be able to accomplish this within about 100 days.
Jointly Develop your 100 Day Action Plan
A 100 Day Action plan is essentially a business plan that both parties will follow. A 100 Day Action plan will include:
– Purchaser and Seller Due diligence
– Getting your legal work done
– Developing a script for stakeholder communication
– What has to be changed with banks, dealers, MGAs, suppliers etc
– Decide on the Purchaser’s and Seller’s roles during the transition period
– Map out a game plan for the 2nd 100 days
Confidentiality Agreement
A prudent seller should insist on both parties signing a Confidentiality Agreement prior to starting any due diligence. A good agreement should also include a client non-solicitation in favour of the seller.
Letter of Intent and Exclusivity Agreement
A Letter of Intent should be signed that states the purchaser’s intent on pursing a deal subject to a mutually acceptable due diligence process from both parties. Purchasers would be wise to request an Exclusivity Agreement that states that the seller will not pursue or entertain other 3rd party offers during the due diligence phase.
Secure Financing
A seller should insist on proof that the purchaser is able to finance the acquisition. Please refer to future blog articles on financing options.
Purchaser and Seller Due Diligence
- Obtain a breakdown of the client list, revenues generated, products and services used and size of their holdings
- Obtain and review the last three year tax returns to confirm revenue and expenses related to the book.
- Obtain a list of all appropriate licenses held and proof of errors and omissions coverage continuity.
- List of all provincial jurisdictions where clients reside along with any out of country situations.
- Listing of all prior dealer and MGA relationships
- Listing of all client complaints along with details of resolution and all compliance department correspondence.
- Details and documentation of any dealership and regulator audits including deficiencies and plan of action.
- Listing of all non insurance and industry activities.
- Details of any employment matters
- Referral Arrangements
Purchase Agreement
If you’ve reached this point, congratulations, it’s closing day. Now you must start your 2nd 100 Day Action Plan. Stay tuned for our upcoming article on the 2nd 100 Day Action plan.
Get professional legal help
This is not a good time to skimp on professional legal advice and help. Be sure to have a competent lawyer draft your legal agreements and be prepared to share the legal costs.
No comments:
Post a Comment