“Why do you want to sell?” or “Why do you want to buy?” are the crucial questions that must be answered before a financial advisory firm changes hands, according to a panel of experienced buyers and sellers who discussed merger and acquisition strategies at Financial Advisor magazine’s Invest in Women Conference today.

M&A activity continues to speed up and valuations are going through the roof, but a lot of detailed work goes into the deals before and after the owners sign on the bottom line, said the members of the panel, moderated by Evan Simonoff, editor-in-chief and editorial director of Financial Advisor.

The price of firms that are bought is what has drawn the attention of the industry, but it is usually the way staff and clients are going to be treated under the new ownership that makes or breaks a deal, said Christeen Reeg, principal and financial advisor at CAPTRUST. Reeg recently sold her California-based firm, Pacific Investment Consultants, to CAPTRUST. The firm had a plan in place in case of the death of a principal, but not for an advisor wanting to leave. Under the new ownership, the team is already experiencing growth, she said.

“If you (as the owner) are happy with the move, the staff and clients will be happy with it,” she added.

Kay Lynn Mayhue, president of Merit Financial Advisors, which has offices along the East Coast, noted that the M&A market for financial firms “is a fast moving ball game.

“It’s about time that prices for firms are up. I hope they go even higher,” she said. Mayhue has completed 10 acquisitions, with five of them involving female owners, and explained that it is not price that matters as much as how the staff and clients will be treated under the new management.

Junette McCarthy, wealth manager at McCarthy Wealth Management, a financial advisory firm based in Newport Beach, Calif., who has completed six acquisitions and has another in the works, agreed with her colleagues that staff and clients are top of mind for a seller.

At the same time, flexibility is important for the buyer. “Prices are always going to change, but that is not the prime motivation for sellers,” she said.

Buyers have to be willing to give the selling owner, staff and clients what they need. McCarthy said she has crafted different agreements with sellers depending on whether they want to continue working, slowly transition out of work, or walk away immediately.

“Each seller is unique and I work with them to see what is important to them,” she explained.

First « 1 2 » Next