This news service talks to UBS in the US about the work its specialist advisors undertake with owners of SMEs looking to quit the business trenches. What sort of emotional and practical issues arise?

Rising interest rates – although from a low level – and inflation may slow down the M&A carousel for business owners but the job of advising them on transitions will remain brisk for wealth advisors, UBS argues.

The busiest pace in business sales and purchases might be past – and not perhaps a matter for regret if a more considered speed is now the pattern. In any event, an important role that wealth managers play is in advising and counseling owners about preparing to sell up, but then face the dreaded question: “What do I do next?”

It is a situation that James Jack, executive director and head of the business owners’ client segment at UBS, knows well. He has been at the Zurich-listed firm for 17 years, taking him through the peaks and lows of business life. Jack works with a small team – his business group was formed four years ago. Other business segments worth noting at UBS are those handling the “Rising Generation” of younger wealth holders; “athletes and entertainers,” and “multicultural Investors.”

“Wealth management is evolving and it is more than just about assets and liabilities – it is about purpose and legacies,” Jack told this news service in a call. “There is an idea that this [transitioning from owning a firm] is a great opportunity and that it will only come once and it has to be got right…there are tremendous self-identity implications.”

Owners may not articulate it much, but they know that selling a firm means turning a chapter in their lives, and not everyone is mentally and emotionally ready. “It may be at the back of mind….they [owners] may be a bit afraid,” Jack continued. 

A recent UBS global survey found that 42 per cent of respondents said they expected to exit their business within five years. (That number is basically unchanged since the first quarter of 2018 (at the time of a previous study). FWR has heard anecdotally from the industry how Covid-19 has prompted soul-searching. For some owners, the daily grind is not attractive any more.

As many HNW individuals’ wealth managers are intermingled with their operating business assets, the moment of deciding to sell blurs the boundaries of private client advice and corporate finance. Preparation is all. In March 2019, Jonathan Moore of PKF O’Connor Davies wrote in these pages: “Business owners are wise to include the possibility of a sale or acquisition in their long-term planning. Ideally, owners need between 12 and 24 months ahead of a sale or acquisition to implement preparations in those areas likely to increase the value of the business or ease the transition process after a deal. These may include instituting optimal management infrastructure, hiring new talent, introducing new systems and technology, altering budgeting processes and operating through enough business cycles to produce results that are positive and sustainable.”

Transitions take various forms: a trade sale to another business, a float of the firm on the stock market; management buyouts, or employee ownership models. (See an article about the latter example here.)  

It is not just advisors’ clients who must handle business transition. Advisors themselves have business transfer issues to confront, as this article by regular FWR correspondent Charles Paikert shows.

This publication continues to cover the growth of advice on business transition and succession. For example, more than two years ago, we reported the launch of Mainsail Capital Group by former financial advisor Sandra Nesbit. 

What’s next?
Jack argued that advisors must help clients address the following topics: How they fill their days going forwards; the basis for their social life in future (some people mingle social and business life), and their purpose – what they will want to achieve once the business life is over. 

“Our advisors are playing armchair psychologists,” he said. 

“Every business owner should have with them the end of their business in mind,” Jack said. “Unfortunately many business owners don’t plan for an event.”

In that light, Jack said that business owners must think of several “Ds”: Death, disability, divorce, disagreement and distress.