Brands should survive post-acqusition, writes David Hesketh, group M&A manager at Perspective Financial Group Ltd
We often hear about ‘the power of brand’ and trying to relate that to the IFA world can be difficult. Your brand is not simply your beautifully designed logo, rather it is what your business stands for and (crucially) what clients believe it stands for. These can differ greatly.
For example, in 1991, Gerald Ratner clearly didn’t rate his ‘Ratners’ jewellery brand very highly calling the stock ‘total crap’ whereas customers up until that point hadn’t shared the same view. Unfortunately, after the gaff, they came to the conclusion that if the man running the business didn’t value its brand, neither should they. It lost £500 million of value almost overnight and nearly collapsed before it was sold on in 1993. It’s an extreme example, and you would have to go some before you repeated the same feat, however it provides a salutary lesson about respecting a brand.
Of course, when we look at the IFA market we do not generally see the big, multi-national, global-shaking brands that are evident in other sectors. Yet, the power of the brand is just as important at a local level as it is when we are getting into the territory that comes with a Coca-Cola or a Google.
Talking to IFA practices constantly I am fully aware of the importance of their firm’s brand albeit in perhaps a much smaller jurisdiction. Very few practice owners, who are considering their options in the lead up to RDR, are keen on jettisoning their brand even if they are looking seriously at the acquisition option. This is because, after years of building up that practice and the brand there is a great deal of value stored up within it.
This is why we came to the conclusion that all practice offices within Perspective Financial Group would be able to maintain their local brand we would not push firms into one homogenised entity in which they became, for example, Perspective – Bolton or Perspective Marlborough. The fact is that no-one locally would have any clue who Perspective Bolton were and therefore we would have to spend many years building up another brand, when the fact is that we already have a settled and strong presence in that region anyway.
It can often be shown that in fact a local brand is trusted more by consumers to provide quality. For example, how many of us go to the local butchers ahead of that special Sunday lunch rather than the usual trip to the local supermarket – we use the supermarket because it’s cheap but the local producer for quality?
In my experience, most practice owners looking at their exit options are not simply concerned about securing as much cash upfront as they possibly can. They want to know that the future of the business is secure and, importantly, that the brand they have nurtured will continue. In effect, many are looking to pass, what our marketing manager, calls the ‘golf club test’ – post-acquisition they want to be able to speak with other individuals in any setting (perhaps their local golf club), hand their business card across, and for the people they speak to, to instantly recognise them as the boss of their own business – as they always have done.
This is because they are still, for example, the MD of the practice and the name of the practice is still the same. Perhaps they may notice that the ‘Perspective’ name has been added to the card but, to all intents and purposes, they’re dealing with the same individuals, receiving the same quality of advisory service and gaining the same value they have always got from that practice. That individual can then talk about how they are part of one of the largest national IFA groups in the UK and add that kudos in their own time.
Local brands are hard fought for and should not be discarded easily. Having a practice that is well-known and well-respected within a community is absolutely vital for any IFA owner. This is especially the case if the majority of a practice’s business comes through word of mouth or personal referrals it is even more vital if the bulk of business is gained through professional connections with other local firms, such as accountants and solicitors. They want to know what they are getting for that referral and having that quality local brand will be taken as a mark of confidence that this practice is worth conducting business with.
Therefore, those looking at their options may be wise to consider what will happen to the brand in the years to come. Can it be maintained and built upon with support and strength from a centralised operation, or is it to be thrown away resulting in those left at the practice having to start from scratch in order to build a new brand? We know which one we prefer and, we believe the majority of IFA practice owners, feel the same.
Our local brands are all well respected and have developed strong allegiance from their client base that is the foundation for the historic success of most of our offices – why would we destroy that?