Two Key Ingredients to a Proper M&A Strategy
June 27, 2019, by Alex Webb
Not a day goes by that the RIA press isn’t reporting on another merger or acquisition. At industry conferences, the panels discussing M&A are the most highly attended. With more and more outside capital circling, everyone wants in on the RIA M&A game.
Given this is an industry-wide trend, why do we only see press coverage of acquisitions from the same few firms, like United Capital and EP Wealth Advisors?
Familiar names dominate the headlines deal after deal. What do these firms have in common that other potential RIA buyers lack? Yes, they are large and well-capitalized with a national presence, but there must be more to it than that, right? The repeat-headliner firms are all examples of professional buyers. Professional buyers can continually pull off these large deals because of two key ingredients: they have a bulletproof advisor pitch and a proven onboarding process (which makes their advisor pitch that much more compelling!).
Most financial advisors began their careers with the desire to help individuals better navigate their financial lives. However, most didn’t dream of becoming business owners, nor do they want to be bogged down by the daily grind of running a business. An RIA looking to become a professional buyer needs to capitalize on this dichotomy. Take United Capital’s April acquisitions of Irongate International and Peachtree Investment Advisors. United Capital’s CEO, Joe Duran, was able to take advantage of this very fact, stating, “The best and greatest use of their time is to help their clients come to grips with the highly complex, big picture issues that touch every aspect of their financial lives.”
An RIA looking to become a professional buyer must perfect its advisor pitch, in which they are able to articulate exactly why potential selling advisors, their employees, and their clients would be best suited to join their firm. A selling advisor is entering some intimidating waters when finally handing over the reins to their business, which they’ve spent most of their life building. They want to feel that the transaction is more than just an asset grab for the acquirer and that their clients and employees will be well taken care of.
Selling advisors will be reassured knowing the RIA they have chosen to partner with has a clear value proposition and strong, defined culture that can easily be communicated to their clients when the deal closes. Last month, EP Wealth Advisors closed it largest acquisition to date, buying Seattle-based RIA Conlon Dart Wealth Management. Stephen Dart, Founder of Conlon Dart, emphasized the strong cultural fit between the two firms stating, “We consider EP Wealth to be an ideal fit and true extension of our core business philosophy. We have now increased our financial planning and investment management capabilities, along with deeper educational resources to support our clients.”
Professional buyers must back up a strong advisor pitch with an even stronger onboarding process. Selling advisors will want to know that the onboarding of their firm has been well thought out. This should be summarized in a visual that can be displayed during the advisor pitch and includes specific tasks, roles and responsibilities and an overall timeline that shows when all tasks will be completed. This playbook should contain not only big-picture events – like onboarding a new custodian – but also more detailed items, like having branded swag waiting on the desks of every new employee when the deal closes.
Having a playbook that balances between the big picture and fine detail will show the selling advisor that everything in the onboarding process has been contemplated. In one of the most discussed deals of 2018, Sequoia Financial Group acquired LJPR Financial Advisors, a $776 million RIA. Trevor Chuna, chief technology officer at Sequoia, highlighted LJPR’s desire to join a firm with a proven onboarding process in place. “[Sellers] want to have comfort in knowing that where they are going is at least as good, if not better, than what they are moving away from.”
Having a well-defined advisor pitch, coupled with a well thought-out onboarding process, makes transactions successful and repeatable—which drives more and more deals and labels the RIA a professional buyer.
 “United Capital Scoops 2 RIAs with $800M” ThinkAdvisor, April 3, 2019
 “EP Wealth Acquires $517M Seattle Shop” Citywire, May 8, 2019
 “The COO Roundtable, Episode 3, Featuring Trevor Chuna & Shaun Kapusinski of Sequoia Financial Group” PFI Advisors, March 4, 2019
This article originally appeared on Advisor Perspectives.