Mergers and acquisition activity in the RIA industry continues to grab headlines and make history. Despite early setbacks from the coronavirus pandemic, 2020 dealmaking activity bounced back, and Echelon Partners recorded a record-high 205 deals closed last year. The pace has not slowed in early 2021, with Q1 activity achieving a 65% increase over the first quarter of last year.
Our team remains active in the M&A space as well, both at the corporate level and in supporting our partners in completing their own acquisitions. Our team has completed several successful acquisitions throughout our history, and we have built a dedicated M&A team to support our advisor partners as they evaluate acquisition opportunities.
We work closely with advisors who are active acquirers, as well as connect with potential partners for GVA, and are regularly connecting with potential sellers about their objectives. We have seen several common themes emerge from our conversations with sellers regarding what they are seeking in a partner. Here’s what we have observed as the top trends on the sell-side.
A consistent experience is paramount
The acquisition process is inherently disruptive, but for many positive reasons. In some aspects, consistency facilitates a stronger partnership and more seamless transitions. One thing RIAs often look for is a partner who uses the same custodian. Transitioning custodians can be catastrophic for RIAs, a major operational burden that brings a risk of client attrition. Our firm is aligned with LPL Financial, one of the leading custodial platforms in the nation. Our relationship with LPL has been a driving factor in some of our most successful acquisitions and partnerships, making it easier for partner firms to plug into the GVA model on day one.
Enhanced resources and tools close deals
Sellers are not just selling to make a specific profit; they want a clear understanding of how they will benefit from joining your firm. They will be seeking clear details on the resources available to them and how those resources will be delivered. These two factors come together to complete the overall deal structure and help sellers differentiate between potential buyers.
At GVA, our partners come to us because of our in-house expertise, executive leadership team, extensive technology and operational support services, as well as resources for retirement plan consulting and asset management. We most commonly hear clients ask about access to myself and my partners. We make it a priority to stay actively engaged with our advisors and are consistently creating solutions that facilitate even better communication.
Culture and the impact on staff cannot be overlooked
While the firm’s owners are dictating the sale, the entire firm — from advisors to front-office staff — will be impacted by the transaction. The advisors, the relationships they’ve built with clients and the work they engage in every day are some of the main drivers behind the sale, yet they rarely see financial gain from the actual transaction. Keeping a focus on culture creates an environment where advisors can continue to thrive and allows for a more seamless transaction.
We understand that the sales process is incredibly personal for the seller and we make it a priority to be transparent and responsive throughout the process. We make ourselves available to the entire acquisition partner’s team, ensuring their advisors and support staff have their questions answered, too.
Growth needs to be a mutual priority
Advisors who are aligning with another firm are largely motivated by growth prospects. They want the ability to continue running their business the same way, while having access to added resources, tools and scope to up-level their practice. GVA has built a structured firm with open-architecture features and flexibility for our advisors. Our team is growth oriented, and our goal is to help our partners achieve their goals.
As the sales discussions progress and planning becomes more actionable than aspirational, it’s important that both buyer and seller maintain a flexible perspective. While purchase price is almost always the deciding factor, there are certainly plenty of other opportunities to showcase value. Understanding the mindset of the seller is an important starting point.