“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.

Reeg added that sellers “have to decide what they are willing to give up and what is nonnegotiable. If the seller’s firm brand is his or her name, it might be more emotional to give that up.”

“You, as the buyer, need to show the seller why a transaction is of value to them,” Mayhue added. “The most time consuming part as a buyer is to work with the incoming team.”

Unlike acquisitions in some other industries, most buyers in the financial industry are not making a deal so they can squeeze profits out of the firm being acquired, she added. “Most want to buy a firm to help it grow, so keeping the staff is important,” she said.

McCarthy said she can usually tell what sellers want and crafts the agreement to satisfy them. “Communication is the key,” she said.

Before a search for a buyer is started, the seller has to ask what he or she wants to do and why, Mayhue said.

“You are going to have to be able to articulate that to the staff and to the buyer. Then ask the buyer why he or she wants to buy. As buyers, we look for firms that want to grow in areas where we want a new presence or areas where we want to expand our presence,” she said.

“Then ask the buyer why the move is good for the seller,” she added. Those questions have to be answered satisfactorily before any deal can go forward.