Is M&A part of your exit strategy?

M&A activity in financial services has been on an upward trend for years, as large firms buy up smaller RIAs to jumpstart growth or broaden their service capabilities, and private equity firms build up their portfolios.

This is the end goal for many practices; for others, it’s one of multiple options for an eventual exit. In either case, becoming appealing in the M&A space is often crucial to long-term success for advisors today. Here are a few questions to ask yourself to see where you stand:

What part do you play in a family office?

Many buyouts occur as part of an effort to deliver family office services, and thus expand in the high-net-worth space. If your practice is to be considered a potential catalyst to this kind of growth, you need to be seen as a specialized component that could be incorporated into a larger whole, or an operation that is already oriented toward family office–style capabilities. What does your outward brand convey?

How repeatable is your process?

Clients value the way you do things, but could that value be preserved through a major transition? Do you follow the same set of steps for every client, and are other advisors in your practice able to recreate that experience? In the context of M&A, everything from client discovery to the annual review is more valuable when it is repeatable.

How would you describe your clientele?

The mix of clients you serve is both a potential asset to a purchasing firm, as well as a reflection of the value you’re delivering. How would you describe your client base in terms of not only asset level, but also loyalty, advocacy, referrals, satisfaction and demographics?

Do you have any reliable lead pipelines?

Much like your internal and client processes, the ways in which you acquire new business have more value when they’re consistent and repeatable. If you have a thought leadership following through a blog or podcast, a well-developed COI referral process or an established seminar program in your community, you can better position your practice as a growth asset.

Do you have a standalone brand?

In order for you to navigate a successful sale or succession, your practice’s identity needs to be distinct from your identity. While of course you will be a part of your external brand, the value of your practice should be discernable, independent of you as an expert or a personality. Quite literally, your business needs to be valuable without you, and this is often accomplished through a clear value proposition, strong market positioning, and a solid internal and external brand.

Reach out to us if you are looking for ways to position your practice for an eventual sale.