Successful M&A Deals Should Emphasize an Entrance—Not an Exit—Strategy August 07, 2008 20080807 PDF Over the last decade, mergers and acquisitions (M&A) transactions in the registered investment advisory (RIA) industry have evolved from a focus on the deal to a focus on synergies.
Mark Tibergien Over the last decade, mergers and acquisitions (M&A) transactions in the registered investment advisory (RIA) industry have evolved from a focus on the deal to a focus on synergies. PDF
Successful M&A Deals Should Emphasize an Entrance—Not an Exit—Strategy

August 07, 2008

Over the last decade, mergers and acquisitions (M&A) transactions in the registered investment advisory (RIA) industry have evolved from a focus on the deal to a focus on synergies. Acquirers seeking to capture a greater share of the RIA market must become more sophisticated in determining whether a potential target offers the optimum opportunity to leverage economies of scale and resources to help drive future growth and profitability.

An increasingly crowded landscape of acquirers, including growing interest on behalf of RIAs, is serving as a catalyst for record deal making. In fact, a total of 58 transactions were consummated in 2007, more than in any other year so far this decade. Multiples for premium targets also continue to gain momentum and the number of high-quality firms is becoming scarcer. To find the best deals, acquirers need to be more selective and focus on firms that have developed scale, infrastructure, and talented professionals. Most importantly, acquirers should be on the look out for firms that have a clear positioning and continue to invest in their practices—businesses that are built to last.

Pershing Advisor Solutions and Moss Adams LLP have closely analyzed advisory firm M&A activity through our independent studies, Real Deals 2006 and Real Deals 2008, and found that transactions have stimulated significant growth for both acquirers and sellers. Below are some important facts to consider:

  • Firms acquired this decade have experienced compound annual assets under management growth averaging 26% in the two to five years following an acquisition;
  • A typical affiliated firm sees a 30% to 40% increase in revenue 12-18 months after it is acquired;
  • All firms have at least double-digit growth during the following 12 months; and
  • Assets under management increase an average of 16% 12-18 months after acquisition.

It’s clear that M&A can play a strategic role in helping you grow your practice. However, there are a wide range of challenges that you must be mindful of to ensure that any transaction you’re engaged in is the right fit for you and your existing clients. To help you meet these challenges, we encourage you to leverage the insights and expertise delivered through our Ideas Without LimitsSM thought leadership program and our ValueAllianceSM program.

Today’s business landscape is fiercely competitive. At Pershing Advisor Solutions, we are confident that our consultative approach, experience, and passion for excellence will add meaningful value to growth-minded advisors seeking to grow their practices and achieve continued success.