GRP’s Stephen Ross on why sometimes selling your house is like selling your broking business

March is the time for estate agents to dust off their glossy brochures and open their doors to new instructions.

Spring traditionally kicks starts the UK housing market and, as if in unison, the newspapers are suddenly full of advice on how to spruce up your house to ensure it sells. A lick of paint, remove clutter, tidy up the front garden and your house will go in a week.

In broking mergers and acquisitions there does not seem to have been any off season. To say that the market is cooking on gas is an understatement, and although the Chancellor of the Exchequer has stayed his hand on reforming entrepreneur’s relief in the March Budget, that doesn’t seem to have brought any reduction in deal flow.

For those brokers mulling a sale, what do they need to think about in order to get a deal away?

We looked at more than 100 transactions last year, but only a small proportion of those resulted in a deal. It is true for us and all our peers that we are defined by the deals we don’t do as much as the ones we do.

Of course, all acquirers have their own criteria in determining whether an acquisition proceeds or not, and there are a number of things we look out for at GRP.

The quality of the management team is crucial; flair and entrepreneurialism are vital for teams wanting to continue and grow their business under new ownership.

Management teams looking to crystallise value and retire need to make sure their succession is clear, that the next generation of leaders are properly incentivised and future management roles and responsibilities are in place and clearly defined.

It’s important to make sure the nuts and bolts of compliance are in good shape; client money must be clean and the financial reporting clear, so that the due diligence process is as simple as possible.

Any potential problem areas must have been dealt with pre-due diligence. There might be areas such as a complicated tax structure or one business embedded into another, which are best sorted out before the vendors embark on a sale process.

Location, location, location

Like housing, location also helps. It’s no secret that GRP is interested in acquiring businesses throughout the UK but there are certain geographies where we are underweight, for example the North East and within the M25. A UK-wide footprint is an important strategic consideration for many acquirers so some areas may be more desirable than others.

For the acquirer’s part, it is important that the vendor alights on the best custodian for their business in the future. That requires the right chemistry between buyer and seller, a shared client service philosophy and a clear understanding of how the buyer will accelerate business growth.

Often, a house which ticks all the boxes on paper just doesn’t feel right when the estate agent shows you round for the first time.

That happens in M&A too. Sometimes you have to just walk away, knowing that another opportunity may be just around the corner.