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10 Steps to a Successful Acquisition

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When it comes to growth options for RIAs, an acquisition can make excellent business sense. While many practices grow their AUM organically by an annual rate of 10 to 15 percent, an acquisition can increase that growth to 20 to 50 percent.

Now, the time is ripe for acquisitions. Barron's reports that 2021 has been a record-setting year for M&A activity in the RIA industry, with no signs of slowing down in 2022.

With approximately 50 buyers for every seller, how can advisors set themselves apart?

To get started, follow these ten steps to pave the way for success:

1. Secure financing in advance 

88.9% of advisors over the age of 65 responded that prospective buyers' access to bank financing was either "important," "very important," or "crucial."

Wealth management practices can now be purchased using bank loans based on the cash flow of the buyer and the seller's practice. Obtain pre-approved bank financing based on your revenue and credit.

2. Put yourself in the seller's shoes

A qualified buyer must demonstrate their firm's exact services and how the individual client experiences them. Put yourself in the seller's shoes throughout the process to maximize your insight into their perspective.

3. Show a scalable growth model

Be ready to show the seller that your business model is consistent and repeatable. Make it clear you can successfully continue this model once the acquisition increases volume and drives the inevitable referrals that come with a well-executed practice acquisition.

4. Prove you are not a one-person band

The qualified buyer's service model includes business staff prepared to meet many clients' needs if the owner is on vacation or in a meeting.

5. Communicate your offerings

Especially the client experience – Identify what makes your client experience unique and communicate these offerings to set your practice apart.

6. Identify and close service model gaps

If you have not already done so, consider undertaking a practice tune-up by hiring a business consultant. A consultant can help you quickly identify gaps in your service model and provide specific improvement opportunities.

7. Show you can and will take care of trusted employees

Especially for many small- to medium-sized business owners, employees become "family" for whom sellers feel an intense bond and great loyalty. Let the seller know you will take care of their trusted employee(s) and ensure they will continue to enjoy a comfortable working environment. Prepare and share management history and staff retention data.

8. Make it clear you are a qualified buyer

Any successful acquisition depends on the seller's faith that the buyer can afford to pay for the transaction. Many sellers walk away or resist an outright sale due to fear that they may not achieve the full purchase price. Even if this fear is unfounded, it is essential to address it. 

9. Build your business profile

Write a solid business profile with a one or two-page marketing overview that clearly and concisely demonstrates your firm's:

  • service model
  • staff structure
  • mission and vision for the business
  • service levels
  • business history and philosophy

10. Share to receive

To build trust, be prepared to reciprocate and provide the same information you expect to receive from the seller. This background should include:

  • revenue for the most recent three to five years

  • assets under management

  • number of households

Establishing professional trust and respect is crucial to a successful acquisition and will make ongoing dialogue and negotiation with a seller that much easier. Follow these ten steps to build a successful relationship with a seller. Starting correctly with a seller decreases the time it takes to build trust. This trust, in turn, dramatically reduces the time needed to complete a successful acquisition.

If you are exploring a possible M&A transaction, SkyView can help. Reach out to a representative at info@skyview.com or call 866-567-6282. To get a headstart on securing financing, consider filling out SkyView's Financing Pre-Approval Questionnaire. 

Interested in financing your merger?