The financial industry is consolidating and becoming more fragmented at the same time – two contradictory trends that would seem impossible to exist in the same environment.
But that is exactly what is currently happening, according to John Langston, founder and managing partner at Republic Capital Group, a service provider and consultant for financial service firms.
“There are opportunities for large acquirers in this market, but there are also opportunities for new entrants,” Langston said today during a presentation on Buying and Selling Advisory Firms at the Invest In Women Conference produced by Financial Advisor Magazine in Atlanta this week.
The amount of money in transition through mergers and acquisitions is growing, as is the amount of private capital that is available to carry out the deals, Langston said.
Planning in advance for these deals is the key to success, said Teri Grubb, senior director at Captrust. “Planning is not a ‘someday’ thing.” Grubb was with South Texas Money Management based in San Antonio when it was acquired by Captrust. “You first have to decide (as the seller) what things you are not willing to give up – what is nonnegotiable. For us, We wanted to grow for our clients and for our collegues at the firm.”
The thing that some firm owners have to get past is that succession planning does not mean the firm is planning for the death of the founder, said Elizabeth Nesvold, managing director and head of asset and wealth management investment banking at Raymond James, who was moderating the panel discussion.
The two things that matter most are not necessarily the money that is changing hands, but whether the cultures of the two organizations are compatible and whether the tools used the two can be integrated, added Kay Lynn Mayhue, president of Merit Financial Advisors. She was with Botsford Financial before it merged with Merit, and became a serial acquirer.
Mayhue said Botsford considered several offers before going with Merit but the officers determined the deals were not adding anything to Botsford, so the firm passed on the offers.
The seller should know they can come out of any negotiation with a customized agreement for what they are trying to achieve, Langston said.
“But you should know that the acquirer is already thinking of where you fit into their organization from the very first conservation,” so sellers should be careful about the way they present any details.