Three Active RIA Acquirers on What it Costs to Create a “Profitable” Deal

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It’s important for a registered investment advisor to hire the right lawyer when selling their firm—but there are little more than a handful in the U.S. who have the specialization; An investment banker may not be necessary to succeed in a transaction—but it’s increasingly far better to have one; And don’t forget to reward support staff through the post-sale integration process—they are, after all, doing all the heavy lifting.

These are nuggets of wisdom shared by a panel of seasoned RIA acquirers at Schwab Advisor Services’ IMPACT 2022 conference in Denver this week.

During a discussion moderated by Francine Miltenberger, managing director at investment bank and M&A consultant DeVoe & Co., Moneta CEO Eric Kittner joined Hightower Advisors’ Chief Growth Officer Scott Holsopple and Wealth Enhancement Group’s head of business development James Cahn to consider the stages of a successful M&A transaction in the RIA space.

The conversation ranged from model and motivation to integration, cybersecurity and (as always) culture, but much of it considered what makes for a profitable sale, and for that, getting an investment banker on the selling firm’s side is increasingly important, particularly as sales get larger, more complex and the market environment gets more volatile.  

“There’s a tremendous amount of emotion that comes along with this,” said Kittner. “An investment banker can help alleviate some of that.”

At the same time be careful about vetting those bankers offering to help, he added. The wrong banker may have predetermined ideas about which deals should be done and how they should be structured, which could leave interesting opportunities off the table.

“Price transparency is pretty widely available,” said Holsopple. “The benefit of having an investment banker is having an advisor on your side that can walk you through the process.”

It’s not necessary to meet as many as 30 prospective targets, he said; a good investment banker has knowledge of the industry with a lot of connections that will save a “tremendous” amount of time.

Cahn maintained that price multiples have indeed fallen in response to the market environment, but new deal structures are, in some cases, “masking” that devaluation. He suggested that principals with a larger advisory force are less likely to wonder if they could have gotten a better deal.

“There are nuances to these agreements around terms that are particularly important,” he said.

“If I restructure a deal to push cash flows out into the future, that’s lowering the price. . . Whether or not you’re seeing the same headline prices, multiples have come down and the price people are willing to pay has come down.”

The best thing a banker can do, he added, is recommend a good lawyer.


“I work overtime to help my clients understand the role that the lawyer can play in this process,” said Miltenberger, pointing specifically to SEC regulation. “When an attorney does not have exposure and understanding to these regulatory issues it creates a much more complex set of conversations.”

Miltenberger estimated that there are less than 20 in the U.S., while Cahn—who has completed 50 transactions with Wealth Enhancement Group— said he regularly sees half a dozen. Outside of that group, he said, “the deals take twice as long, the legal fees are twice as high, and no one’s any better off.”

After the deal is completed and integration is underway, Cahn said it’s also important to compensate back-office staff, those who are learning the new programs and doing all the heavy lifting.

“For all three of our firms,” he said, “the day-to-day experience for the advisor and the people sitting in this room doesn’t change much. But the day-to-day experience for your client service staff, for the people doing wire transfers, filling out paperwork, opening accounts, it changes a lot. And so, my advice to anyone thinking about doing transactions: take care of those people, bonus them very well. It’s time to be generous, because their lives change in a big way and they’re not getting the big check.”

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