Time is your friend, whether your firm is merging with a larger one or you are absorbing a smaller financial entity into your organization, according to the panelists at a webinar today sponsored by Schwab Advisor Services.
Both sides need to take the time to define their goals and make sure they can achieve them, said the panelists participating in Schwab’s webinar, “RIA Industry M&A: Behind the Numbers.”
With mergers and acquisitions continuing at a record pace, “the key to any transition is to take your time,” said Rick Buoncore, managing partner of MAI Capital Management, an investment firm based in Cleveland. “On the side of the acquiring firm, you need to understand what you are looking for. If you are being acquired, you need to find a good fit.”
Records are being set each quarter for the numbers of mergers and acquisitions, according to Tony Parkin, managing director of business, consulting and education for Schwab Advisor Services. For the first half of the year, the industry saw 85 deals closed, almost matching the number for the entire year of 2020. Firms involved in transactions hd $150 billion , a 19% increase over 2020.
But the numbers tell only part of the story, according to Parkin, who added that the firms on both sides of the equation must “envision [the transition], prepare and connect.” MAI and Arrowroot Family Office, which has offices in California, Virginia and Michigan, recently joined Parkin at Schwab Advisor Services nd partnered for the event.
MAI has a dedicated transition team to handle transactions, Buoncore said. “You need to make sure you have the hearts and minds of the employees with you when you are being acquired. They are going to experience some fear of change, so you need to assure them they will be made whole, if you want them to be able to serve your clients well.”
As an example of a good fit between companies, Buoncore noted that MAI has a 14-person team for alternative investments. A firm that is not interested in alternatives might not be a good fit, he said.
Steve Trax, head of sports and entertainment, regional president and senior managing director for MAI Capital Management, added that the firm being acquired needs to make sure it will be improve its services through the acquisition.
Part of the impetus behind the growing number of M&As is that advisors “are living through a time of disruption,” said Rob Santos, founder and managing director of Arrowroot Family Office. “RIAs are under a lot of pressure. We are living in a time of change. A firm has to decide where it wants to be in five or 10 years. Take your time on any merger. There are a lot of options out there.”
They need to think about their national growth goals and define why they got into the business in the first place before undertaking a merger, Santos said. “I’ve seen a lot of standardized deals where not a lot of thought went into how the two firms” can improve each other. “There were a lot of parts of the country where we did not have a presence. We wanted to take what Arrowroot had and expand it.”