The buyer needs to show it has the management capability to handle an acquisition. Successfully completing a transaction and realizing the promised synergies takes a full-time, focused effort by one or more management principals, PFI said.

A transparent compensation method needs to be in place and the acquiring firm needs a strong, defined culture so that the seller can see his or her firm fits with the larger entity.

PFI added, “In order to harvest the promised synergies from an M&A transaction, it is critical that a majority of the clients transition to the new firm and have a good experience in order to ensure retention.” To accomplish this, a post-M&A transition strategy, team and onboarding resources need to be in place.

There are also things for the potential acquirer to avoid if he or she wants to be successful, said Matt Sonnen, founder and CEO of PFI.

“One of the biggest mistakes they make is using the same pitch for potential clients and for a firm to be acquired,” Sonnen said. “You need to tell the advisors how you are going to make their lives easier. So be careful you are not delivering the same message you would to a prospect.“

The second thing to avoid is thinking you will build up the infrastructure after you acquire another firm. “You need to spend the money ahead of time in people and technology in order to attract other firms,” he said.

One firm that has accomplished these goals and made four smaller acquisitions that total  $670 million in assets under management is EP Wealth Advisors based in Los Angeles, with $3.6 billion in AUM.

“Providing fiduciary advice as an RIA started to gain popularity 20 years ago, and since then many advisors left broker-dealers and wirehouses,” said Patrick Goshtigian, president. “The exodus left the market fragmented. We see the M&A trend accelerating to a point where the make-up of the RIA market will be like a barbell: national and super regional RIAs on one end, and the rest of the smaller advisors on the other.”

The $12 billion firm Mercer Advisors, based in Denver, is also an aggressive acquirer and has added 13 firms to its roster with a total of $4.5 billion in AUM.

“Since our first deal in early 2016, we have been an aggressive integrator of independent RIAs,” explained Dave Barton, former Mercer CEO and now vice chairman focusing exclusively on leading Mercer’s M&A activities. The key to Mercer’s success has been to focus on a cultural alignment with the acquired firm.