When selling a firm, most vendors say to us that they want to find a new home that will look after their clients and staff well.

In essence, most parties want a transaction to be successful. We want the clients to be happy and to stay with the new provider, and we, as vendors and practitioners, want to feel good about the deal too. So, the number one thing that I say to vendors about being successful in a transaction or sale is CULTURAL FIT.  Yes, the money is important but where cash is chosen over cultural fit, all too often disaster will follow.

You might say, ‘so why is this important? I’ve got money’.

Well firstly, potentially you have some or most of your money, however where you have agreed to part of the purchase price being held over til a later period of time, against which any potential clawback will be adjusted, a bad transaction is likely to put this at risk. Are you prepared to put at risk 10%, 20%, 30% or more of the overall purchase price should clients leave or annual revenue not be retained? Do you have an open ended clawback where you may have to pay part of the purchase price back if the deal really sours?

Secondly, are you prepared for clients to track you down and tell you how ineffective the purchasing firm is at meeting their needs, responding to messages and the like “Why on earth did you sell or refer us to that new practice?”, will no doubt be a question posed by a dissatisfied past client.

So, when evaluating a potential purchaser, it’s important to consider both the internal and external perceptions in respect of this party. From an internal point of view, the vendor needs to be asking themselves if they think a prospective purchaser has the skills, knowledge, experience, acumen, personality, confidence and demeanour to retain a good majority of their clients. How do you think clients will respond to being serviced by this new party?

If you have positive views around these questions, then ask yourself what the prospective purchaser’s reputation is like within the marketplace. One really good question to evaluate is whether any of your current client base, particularly the larger ones, originated from the firm that is now looking to purchase your practice. If so, you have a problem because they are likely to be the first clients out the door following the announcement of the change and threatening your clawback clause.

Likewise, particularly in regional centres, how is the prospective purchaser’s firm perceived in the area? Are they seen as being conservative, innovative or pushing the limits with their advice? If their approach to doing business is questionable, it may be desirable to rethink the transaction decision.

In short, it’s one thing to think that you are selling the practice to a good purchaser; however the marketplace and your clients may have different perceptions which can potentially impact upon the likely success or failure of any transaction.

Client retention may ultimately determine the likely success of any deal.