By James J. Spinelli, ChFC®, AIF® on November 9, 2021 Driving change or creating disruption in your firm can be challenging, but we would argue it is one of the best ways to spur significant growth. Disruption forces you out of your comfort zone and requires you to do things differently, which can open doors to new opportunities. Change for many RIA firms often comes in the form of M&A activity — both as buyer and seller. The third quarter of 2021 hit a record number of deals and the industry is on pace for yet another record-setting year. Although pursuing M&A may seem daunting, it can help firms rapidly achieve growth that would take years to realize on their own. Realizing the benefits of disruption are daunting, and it is something our team discusses with advisors across the GVA network and beyond every day. Here’s what we tell them: Change goes both ways M&A has the potential to benefit both the buyer and seller in regard to resources and talent. In many situations, the acquiring firm has more dynamic platforms and tools that can be leveraged by the acquired firm to advance their business. However, we’ve also seen situations where the acquired firm had access to a technological resource that the acquiring firm previously didn’t, and was able to start utilizing thanks to the transaction. When advisors partner with GVA, they gain access to both a wide variety of resources and an expansive network of fellow advisors. In turn, we welcome fantastic new talent who bring different skills and expertise that can benefit both our leadership team and advisor network. When there is chemistry between the buyer and seller, M&A can be a win-win situation for all involved. Deciding when to make a change At GVA, there are two transaction scenarios we often encounter. The first is an advisor who wants to disrupt their entire practice to partner with a firm like GVA for added resources and scale. They are taking a chance because they think it’s the best move for their business over the long-term. The second situation is when an advisor decides they want to sell their business or hire a junior advisor in order to build a succession plan. These individuals are seeking a true succession plan, while looking to safeguard their legacy and their clients’ experience. In both scenarios, there is always a compelling reason that triggers the decision. Owners of financial advisory firms do not lightly decide to sell their business or merge with a new partner. These are huge changes that must be approached with proper deliberation. At GVA, we always ask advisors who are considering some form of M&A, “What’s the reason for this decision?” Advisors looking to partner with another firm often want to leverage the buyer’s resources and platform to grow their business and enjoy more support. Advisors seeking to build a succession plan, especially those who are reaching retirement age, typically want to enjoy life experiences that they can’t while managing a $150 million to $200 million book. For instance, they may want to travel more or spend increased time with their families. We ask this pointed question to ensure our motivations, outlook and philosophies align from day one so we can build a successful partnership. Addressing the emotional aspect For many small business owners, the decision to sell their practice is an emotional one. Accordingly, the buyer should understand and respect the emotions driving the decision. As a seller, it’s important that you feel a connection to and synergy with the buyer. The primary focus isn’t necessarily on how much money you can get for the business or any other individual benefits the sale might yield. The decision should also be rooted in what will be best for the business’s growth and your employees. Ask yourself what the structure will look like for your clients and the team. For your clients, will they work well with the potential acquiring firm, and will they enjoy new resources as a result of the transition? For your employees, will there be more opportunities for growth than are available to them now? It’s crucial that the acquiring firm will not only be able to handle your business, but also offer your clients and employees greater advantages. Calculate the risk At GVA, we sit down to calculate risk with every advisor who is considering partnering with us. We’ll talk through various scenarios to ensure their vision for their firm’s future and their growth goals align with what GVA can offer. This requires extreme transparency, and may entail telling advisors that their expectations aren’t realistic or perhaps we aren’t the best fit. But in the end, it allows the advisor to decide what is best for them. M&A can help firms reach their goals and achieve growth that might be very difficult to attain organically. However, a successful merger or acquisition depends on aligned visions and synergy between partners. For more insight on the M&A process and opportunities for advisors within our network, schedule a call with us. Connect with us on LinkedIn and Facebook for our latest insights and team updates.