Internal transactions in which financial advisors buy equity in their firms represent a growing share of wealth management M&A deals, a new study found.
Those deals boost advisors' compensation via stakes in expanding firms, making them more likely to stay long-term. And they're becoming more popular, according to a webinar last week held by consulting firm Succession Resource Group on
Across M&A deals, a small group of highly competitive buyers continues to drive
Grau noted four main M&A trends from 2025: private equity investors' impact on deal sizes, overall higher valuations, a smaller pool of possible buyers and a rising number of internal deals.
"That's not noteworthy in the sense that there's
READ MORE:
Fewer buyers generated more deals in 2025
With respect to valuations, they have "generally always trended up" across Succession Resource Group's annual studies of industry M&A, but the purchase prices "moved up a noteworthy amount this year," Grau added.
Other key takeaways from the report included:
- The average multiple for the ratio of purchase price to earnings before interest, taxes, depreciation and amortization was 9.98x, up from 9.2x in 2024. Firms with higher profit margins but smaller capacity and long-term growth tended to fetch lower prices than firms that had lower profit margins and more capabilities and sustainable expansion potential.
- The average succession plan duration spanned about 6.5 years, with 48% of the arrangements using external financing and the other 52% of sellers sourcing the capital themselves.
- In terms of the breakdown of assets changing hands in deals, 32% of the assets were stock, with the remaining 68% predominantly in the
form of goodwill and clients and a small share attributable to consulting fees and restrictive covenants for the seller.
- By region, sellers in the Midwest fetched the highest ratio of purchase price to annual revenue, at 3.48x, followed by the Northeast (3.3x), the West (3.28x) and the South (3.17x). Finot noted that out-of-state purchasers bought advisory practices at a premium of 13% above the amount paid by in-state acquirers over the last five years. However, the share of M&A deals
secured by out-of-state buyers dropped to 25% from 33% in 2024.
The continuing flow of
"Sometimes we see folks that show up and say, 'Yeah, for the last four or five years, we've talked about this, thought about it, gotten to a pretty good spot, and now we're ready to implement the plan,'" Finot said. "I would generally advise to at least consider starting the planning process earlier in that window, provided you feel that the successor or successor team is qualified and you expect them to be viable options in that, again, you have more flexibility. You have more insight into what lies ahead. It can tamp down on junior partners thinking, 'Well, hey, I keep growing this and it just keeps getting more expensive.' There are strategies to address that, or at least concepts to help everyone feel comfortable with these trade-offs. So I would just advise getting started earlier, getting a plan in place with either more direct obligations or complete flexibility. But, getting that planning done earlier, it's going to produce even better results."
READ MORE:
Investing in the future
Other industry experts reported similar findings regarding last year's M&A activity. Even though RIA M&A volume reached a record 322 deals after jumping 18% last year, consulting and advisory firm DeVoe & Company's
"Buyers are deliberately designing the firms of the future, making thoughtful choices about what they want to build and how they want their organizations to endure," it said. "These themes were central at the recent DeVoe & Company M&A+ Succession Summit, where growth, succession planning and culture consistently surfaced as defining priorities. Industry leaders spoke less about near-term outcomes and more about enduring enterprises and future-forward organizations built to last across generations. The conversation reflected a growing recognition that long-term success requires intentionality around leadership, alignment and collaboration, not just transaction volume."
During the Succession Resource Group session, Finot and Grau credited brokerage and RIA firms with helping more buyers of any type secure the necessary capital for deals. For many of the internal deals related to succession planning and advisor retention, many firms embrace structures that use "the shared growth model, where [advisors] earn a stake in the appreciated value over the next couple of years," or seller-financed deals "using the profits that are required to pay for the note over time," Grau said.
A third type that is becoming increasingly common acts as "the entry point to the succession plan" by providing so-called synthetic or phantom equity for advisors earning deferred compensation with some of the benefits of actual stock shares, he said.
"That was reserved for the biggest, most complicated firms up until a couple of years ago," Grau said. "Now, a lot of firms are leaning into phantom and synthetic equity as way to let the next generation start to accrue a little bit of a balance, so that when they do finally get invited to the big kids table to buy in, they've got a little bit of a down payment or a discount that can be applied. It helps grease the wheels a lot. It's also a great retention tool, because it's phantom equity, and, if they leave before they realize the value of it, it goes up in smoke."
