Advisory firm owners who were thinking of selling at some point in the future are pushing up the process because of the favorable market conditions that exist now, according to a panel of acquirers.
A lot of money is available for sellers and valuations have increased at an unprecedented rate in just the last year, according to Derek Holman, co-founder and managing director of EP Wealth Advisors, a national financial services firm and acquirer.
Holman was one of the representatives of acquiring firms convened by DeVoe & Company for the M&A + Succession Summit held in San Francisco yesterday and today for an event called, “Lessons from Seasoned Acquirers: The Big Decision and Getting Started.”
“Scale matters and size matters. Smaller firms are joining others for scale, rather than building it themselves,” said David Barton, vice chairman of Mercer Global Advisors based in Denver. “In the consolidation of the industry there will be winners and losers. Twenty percent of the companies are going to end up with 80% of the business.”
Mercer Advisors completed 13 acquisitions in 2020 and already has done 11 this year.
“Deals beget more deals,” added Mike LaMena, CEO of Wealthspire Advisor, a financial services firm of independent advisors based in New York City. “A lot of RIAs are coming to the table now because of the good market conditions.”
“This is a true sellers’ market,” Barton added.
“Why” is the most important question to ask when selling a firm, according to the panelists. If the seller does not have a solid answer for why he or she wants to sell, then the deal should wait.
A transaction can take many forms, from strictly a financial transaction to a complete integration, LaMena said. “In the middle, there are many variations.”
When to tell the team at the selling firm is a question to be faced by the firm owner.