The desire to make sure the next generation within a firm is at least satisfied with the transition, even if they are not the new owners, sometimes is carried to an extreme, according to Rush Benton, senior director strategic growth at CAPTRUST, a national RIA that has $98 billion in AUM.
“It is interesting to see how far a firm is willing to go to include the next generation—some small firms almost give over the decision about the transition to the next generation,” which is unwise, Benton said.
The acquirers agreed the pace of increases for valuations is slowing. A deal is based on the science of the numbers, but it also based on art, which is the talent, they said.
“The track record of growth for the firm and of the talent of the firm are the metrics that matter today,” Furey said.
Private equity is available in abundance, which is part of what has been driving valuations up, but “the industry is not ready for public companies yet,” Benton said. “It is better to remain private.”
The few deals that CAPTRUST has seen fall apart after they have been started have done so because of a mismatch in the personalities of the principals, Benton added.
Both Benton and Bicknell said their firms have been involved in record numbers of acquisitions in the last 18 months and that more are in the pipeline. “There is nothing in sight that indicates a slowdown in M&As,” Benton said. “The number of firms interested in selling is astounding. It is true, the number of buyers is increasing, but there are so many more sellers that it is really a buyers’ market. The buyers can afford to be picky. I’m not sure we can even look at 25% of the deals that come across our desks.”