Since the 2008 economic downturn, much as changed for advisors in the market. Today, they are increasingly turning to a new strategy which supporters argue is more satisfying and profitable than selling out and moving on. Advisors are now merging with another firm and continuing to work, but at a much slower pace. Before 2008, private-equity firms and aggregators were more interested in buying assets than keeping previous principals around on a part-time basis. Since then, capital for acquisitions has been tighter, and buyers are more concerned about the risk that clients may leave once their advisor is no longer with the firm. With the new strategy, internal successions and mergers with continued owner involvement now demand a higher price than standard or all cash deals. Recently, Savant Capital LLC added $461 million in assets after the merger with The Monitor Group Inc. In addition, The Monitor Group’s price is now 25 to 30 percent higher because all of the advisors are fully committed. According to FB Transitions, all-cash acquisitions generally sell for about 4.6 times revenue, while internal deals receive the highest multiple, at up to about 6.25 times revenue. The “sell-and-stay merger” strategy creates more value because it is better accepted by clients who are paying closer attention then they were before 2008.
Eccleston Law Offices counsels, represents and defends financial advisers nationwide in regulatory, compliance, disciplinary and employment matters in arbitration and litigation, and before regulatory bodies such as the SEC, FINRA and state securities regulators. We frequently defend forgivable loan collection actions, prosecute Form U-5 defamation actions, counsel advisers as to how to transition successfully from firm to firm and negotiate the best possible agreements with their new firm, and provide succession planning, buy-sell agreements and other exit strategies and strategic consulting, practice transitions, mergers, acquisitions and divestitures.
