We’ve all read the bevy of recent headlines about how hot the M&A market is in the independent wealth space. So, it should come as no surprise that many successful advisors say they are being inundated with inquiries asking if they’re interested in selling their business. Those who feel they’re still years away from wanting to sell may be inclined to ignore these calls.

My advice: take the call. Whether you’re 40 years old with a growing business, or in your 50s running a well-established business, the smart move is to take the call and see what they’re offering. You never know where a conversation will lead or what may happen in your life that could necessitate a change in your views. On top of that, even if you are many years from selling, listening to what a potential acquirer has to say is a great way to learn about the possible options available to you when it does come time to make a move. Look at it as valuable business intelligence landing on your doorstep.

Be Prepared For The Initial Conversation
To prepare, I recommend creating an Excel file to capture information from conversations with potential suitors. This gives you the ability to incorporate some of the best practices other firms are using, make tweaks to your current model to improve enterprise value and understand what attributes buyers are seeking.

Some questions to consider asking are: When and how do the current owners plan to exit the business? (This provides insight as to when you, your clients and employees would need to make another transition, after you transition into their firm). What are the values of the firm? (Alignment of values is a crucial determinant of transition success beyond when the check is cashed.) How does the culture of the firm operate? (While most firms say they have a terrific culture, are they overly competitive so it is every person for themself? Or do they fully cooperate and support each other and does the compensation structure align with what they say they do?) Alignment of vision and style of interaction with clients is as important as the financial aspects of the deal. Asking questions about these non-financial considerations in your initial call will likely help you eliminate some potential acquirers right out of the gate.

During the calls, be in “listen and learn” mode. Ask questions, yet be careful not to share your firm’s information too early in the conversations. Sadly, there are many firms that position themselves as seeking to acquire when they are really seeking to learn competitive intel.

As you collect insights and information over time, you’ll be able to compare elements such as:
• Firm structure
• Equity vs. cash offer
• Business and employment models (partner, independent contractor or W-2)
• Compensation and new business incentives
• Qualitative elements such as culture, values personalities, etc.

Keep Client Needs At The Forefront
It’s not uncommon for an advisor who has built a business with years of sweat and toil to spend five or more years looking around the marketplace to find the right buyer once they’ve made the decision to sell. This timeline is usually driven by a desire to find a buyer who will continue to care for your clients in the same way you’ve done for many years, or better! While many focus on the purchase price, the deal structure is more important. The ultimate decision will be made based on your comfort level with your legacy.  While there are new records being set each quarter in our industry, we can’t lose sight of the importance of the relationships and the community advisors have spent their whole careers building. After you retire, when you pass a client in the grocery store, at a baseball game and at church, you want to feel confident that you left them in good hands—meaning your sale was not only good for you, but it was good for your clients as well.

When you’ve taken these calls over the years and built up your knowledge, you’ll have a better idea of the type of sale that will be right for you—and your clients.

It’s no surprise that many of the deals in the advisory space are private peer-to-peer transactions. Having worked on the investment banking and consulting side, I have seen many advisors sell their practices without a competitive bid process because the business and their clients are so personal to them. Their primary consideration is not the numbers. They want to leave their clients and employees in good hands.

There are probably many more of these deals every year than most realize because they are smaller businesses (under $500 million in assets), and since these aren’t billion-dollar deals, they’re rarely reported.

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