Advisors who overvalue their firms derail as many as 40% of pending merger and acquisition deals, according to Fidelity’s 2019 M&A survey of 150 serial acquirers and their transactions over two years.

Avoiding the mistake of overvaluation is a critical and strategic step that advisors need to take from the moment they get the merger sparkle in their eye, said Sandra Nesbit, a veteran wealth manager who last year launched her own M&A consultancy, Mainsail Capital Group, in Clearwater, Fla.

“Advisors confuse their cash flow needs with their firm’s actual value because it’s personal,” she said.

If advisors overvalue their firm and inflate their price tag, it means they’ve failed to recognize the traits and synergies sought by buyers or address their firm’s weaknesses, according to Nesbit.

She sold her own RIA firm in 2018, the Clearwater-based GFS Private Wealth, to serial acquirer Mercer, where she became a managing director of M&A.

She left Mercer last year and formed Mainsail to act as a consultant to advisors interested in pursuing a merger or acquisition.

Instead of fixating on purchase price, she tells firms, “start by solving for your situation,” Nesbit advised.

“You don’t want to jump at the highest bidder and then end up having an angry divorce down the road,” she said. “Start by working on what you want to achieve.”

As a longtime wealth manager, she conducted a yearlong search before negotiating the acquisition of GFS with Mercer.

“Succession and transition will be one of the most important decisions an advisor will make in his or her lifetime. Unfortunately, many advisors don’t know what they don’t know—and there may only be one opportunity to get it right,” she said.

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