Who buys trail books
Three kinds of buyer operate in Australia. Other brokers, usually in the same aggregator group, who want to grow a book faster than settlements allow. Brokerages and aggregator-backed consolidators who buy books from retiring brokers as a strategy. And specialist trail-book lenders and funds such as Broker Capital, who either buy outright, list books through a buy-or-sell service, or finance a broker's purchase and therefore run their own due diligence on top.
All three price the same way, as a multiple of annualised net trail, and all three adjust for the same things. Where they differ is in structure: an individual broker buyer is more likely to pay over time and want a handover; a fund is more likely to pay a larger proportion upfront and want cleaner data.
The data pack
A sale moves at the speed of the data pack. The buyer will ask for, at minimum, twelve months of RCTIs and ideally two to four years; a loan-level schedule listing lender, account, settlement date, balance, rate, loan type and the last twelve months of trail on each; the aggregator agreement and commission schedule; lender accreditations; a list of loans inside their clawback window with the recoverable upfront on each; and the arrears history.
Prepare it before the first conversation. A seller who can send the schedule and have it reconcile to the statements on the first pass is trusted; a seller whose numbers move during due diligence is discounted for the doubt.
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What due diligence looks for
Run-off. Calculated from the statements, not from the seller's estimate. Twelve-month run-off by balance is the standard measure, and a buyer will also look at the trend across the years supplied.
Concentration. Share of trail by lender and by client. A book with a third of its trail from one lender, or a handful of large clients, carries a discount.
Age profile. How much of the book settled in the last two years, both because those loans carry clawback and because young books have not yet shown their run-off.
Arrears. Loans in arrears in the last twelve months, excluded from annualised trail and read as a signal about the client base.
Reconciliation. Whether the loan schedule ties to the RCTIs to the dollar. This is the test most sellers fail without realising it, and it is the one that costs the most confidence.
0.25×
A typical difference in multiple between a reconciled book and one that is not
On $72,000 of net trail, a quarter turn of the multiple is $18,000. The reconciliation work takes a few days.
Deal structures
Outright purchase at a fixed multiple is the simplest and rarest. More common is a deferred structure: a proportion at settlement, often 50% to 70%, and the balance over 12 to 24 months adjusted for run-off, so that if clients leave after the sale the seller shares the loss. Clawback exposure is usually handled by a holdback equal to the recoverable upfront, released as each loan passes its window.
Earn-outs tied to the seller's continued involvement are common where the seller is staying in the industry, and rarer where they are retiring. Vendor finance, where the seller is paid over several years by the buyer from the trail itself, is common between individual brokers and carries obvious counterparty risk; it is worth a lawyer. The alternative is for the buyer to fund the purchase with a trail book loan from a specialist lender such as Broker Capital, so the seller is paid at settlement and the lender, not the seller, carries the buyer's risk.
The aggregator question
Trail is paid under your aggregator agreement, which means the aggregator sits in the middle of every sale. The buyer usually needs to be accredited with the same aggregator, or the lenders must agree to re-paper the trail to the buyer's aggregator. Some lenders do this readily; some do not; a few will not transfer trail at all, which can leave part of a book unsaleable outside the group.
Aggregators also have their own rules on book transfers, sometimes including a right of first refusal or a transfer fee. Read the agreement and speak to the aggregator before listing. It is the single most common reason a sale that looked agreed falls over.
Mistakes that cost sellers
Quoting gross trail instead of net, and losing the buyer's trust when the RCTIs show the split. Listing without checking the aggregator's transfer rules, and discovering the right of first refusal after the price is agreed. Letting reviews lapse in the last year because the book is being sold anyway, which lifts run-off exactly when the buyer is measuring it. Accepting vendor finance without security over the trail. And handing over a folder of statements instead of a reconciled schedule, which turns a two-week due diligence into a two-month one and a discount.
None of these are hard to avoid. All of them are common, because most brokers sell a book once.
Twelve months before you sell
Everything a buyer discounts is something a seller can fix in a year. Reconcile every statement so the schedule ties. Review the clients whose fixed rates expire and whose rates have drifted, and reprice them, which drops run-off. Call clients in arrears. Let the youngest loans season past their clawback windows. Diversify new settlements across lenders. Keep the review notes, because a buyer who can see a review history believes the run-off figure.
The result is a book that sells faster, for more, with more of the price paid at settlement. It is the same work that makes the book worth keeping.