We have been seeing merger and acquisition activities reach new heights. Firm owners know that a transaction can greatly aid them in accomplishing their strategic goals and business objectives, and for 10 years now, the independent financial advisory industry has enthused about a forthcoming merger and acquisition upturn – a trend that seems to have finally come to fruition.

Buyers vs. Sellers

According to Echelon Partners, in 2019, there were 203 RIA acquisitions. This number is up 12% from 2018 and constitutes a 15.4% yearly acceleration over the last half-decade, and it comes as no surprise that 30% of firms currently contemplating a transaction are looking for a succession solution! A majority of the time, transactions are discussed with the owners’ exit as the end result, but these deals are just as significant for owners looking to continue growing their own companies instead of parting with them. These transactions can stimulate growth in many ways, including increasing firm mastery, tapping new markets, and achieving scale economies.

Although buyers and sellers often share several mutual reasons to engage in the deals, the method of engagement varies for each transaction. Buyers want to initiate an acquisition to further accomplish their tactical goals, while sellers also want to do this for the objective of achieving greater growth or for succession purposes. Although both have different strategic objectives, they create a win-win solution that brings both parties closer to their goals. A common challenge we witness our sellers struggle with, however, is that they are more prone to emotional attachment to the firm they spent time and energy to grow, staff that has become a second family, and clients with whom they’ve developed friendships over the years.

Anticipated vs. Actual Benefits of a Merger or Acquisition

It’s nearly impossible to predict the outcome of a transaction. Sometimes, the end goal is not completely achieved; sometimes asset growth occurs quickly, or other goals, such as economies of scale, take longer to accomplish. The rate of progress always varies, and we can only make educated guesses on what will happen.

According to an FA Insight survey, it takes longer to reap all of the transaction benefits for a first-time buyer, since they have never before acquired or integrated a firm (FA Insight, 2016). After the first deal, the learning curve increases tremendously, because the buyer can use the knowledge gained from the first acquisition to execute future transactions with more expertise and strategy. Additionally, complex transactions tend to lengthen integration time, particularly if an alternative investment philosophy approach or technology conversion is required. It is believed that growth is more easily and efficiently achieved with a merger or acquisition as opposed to organically. Even with thorough planning, a stipulated transition duration, and complete cooperation from all transaction participants, unforeseen complications may occur that can affect and, in some exceptional cases, prevent a firm from reaching its strategic goals. Advisors must expect the unexpected and decide the best way to proceed with the information on hand when these unforeseen events occur.

Future Predictions

While things have been quite uncertain, based on recent trends and research, we can anticipate transaction quantities to continue increasing as firms gain more interest and exposure. We saw that in a mere two years, the number of RIAs that had experienced a transaction grew exponentially. According to the FA Insight survey, the percentage of firms participating in transactions is expected to spike, with 76% of firms predicting that they will transact in the future (FA Insight, 2016).

Who is your ideal transacting partner?

Just like you have criteria for further business development opportunities and finding top candidates for job positions, you must ascertain your transaction partner is ideal and best aligns to your business goals. What important characteristics must they and their business have to help you realize your strategic objectives? Because there is no checklist to finding the perfect partner, many advisors often find challenge and uncertainty in determining potential partners that can fulfill all of their essentials, including “soft” traits.

The e-Merge Program from Succession Link is a customized matching service for those interested in Merging or being Acquired. The program provides concierge support through the entire M&A process, providing you with matches and introductions so you can find the ideal long-term relationship and gain success.

Check out our platform at https://connect.successionlink.com/emerge-b, and learn more about working with us on your M&A agenda!



FA Insight. (2016). Mergers & Acquisitions in the RIA Industry: Overcoming the Big Disconnect. FA Insight.

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