Navigating a Busy M&A Market

Financial advisers looking to cash in on the record-level valuations in the midst of record-level acquisition activity in…

Dec 11, 2019 @ 9:32 pm

By aahrens

Financial advisers looking to cash in on the record-level valuations in the midst of record-level acquisition activity in the registered investment adviser space would be wise to seek outside help, according to some of the industry’s busiest buyers of advisory firms.

“You have an obligation to be educated, and there’s no excuse for not being smart and knowing your options,” Bob Oros, chief executive of HighTower, said during a panel on merger and acquisition activity at IMPACT.
“High valuations go to high-quality firms,” Mr. Oros said, underscoring the point that even in a seller’s market, consultants and investment bankers can help firm owners to get the best deal structure.

“We’re seeing some supply-demand imbalance that could impact valuations,” Mr. Oros said. “There’s risk to the seller that maybe you don’t get your first choice, and I see some periods where it’s more of a buyer’s market.” With RIA acquisitions occurring at a breakneck pace in 2019, it might be difficult to think of this as anything but a seller’s market. But the panel of big buyers confirmed that the M&A business can be highly nuanced.

The standing-room-only session featured Mr. Oros along with David Barton, vice chairman of Mercer Advisors; and Adam Birenbaum, CEO of Buckingham Strategic Wealth.

Session moderator David DeVoe, managing director of DeVoe & Co., set the tone by identifying the primary consolidation drivers as a general lack of succession plans and a near-constant pursuit of scale.

“I think we have a crisis emerging in our industry with the lack of succession planning,” Mr. DeVoe said. “And I think we will have more firms coming to market than the buyers can absorb.”

Another factor driving consolidation as well as valuations in the RIA space is the reality of financial markets hovering near all-time highs.
“I don’t see [valuations] coming undone in the near term unless there’s a market pullback,” Mr. Barton said. “If we could exclude the stock market, I think the upward trajectory will continue.”

Given the frothy markets, Mr. Birenbaum said there is no room for novices when it comes to buying RIAs. “For anyone thinking of getting in as a buyer at these levels, I’d be scared…This can be a really scary time if you do not know what you’re doing,” he said. “If we go into a bear market and you structured


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