Mariner Wealth Advisors made a big splash in a tight M&A market, taking a majority interest in Vantage Investment Advisors, a $1 billion RIA based in State College, Pa.
The acquisition lifts Mariner's assets under management to more than $12 billion and expands the Leawood, Kan.-based firm's footprint in the northeast, where it has made four major acquisitions in the last three years.
Nonetheless, Mariners' chief executive officer Marty Bicknell says geography isn't the firm's primary consideration when pursuing a local RIA.
"Geography is never important in the beginning," Bicknell says. "We don't put pins on a map. We try to start with the individuals and then determine if the markets make sense."
Bicknell estimates that Mariner looks at about 200 local firms each year, and ends up in serious conversations with around 10. Last year Mariner made two acquisitions, preceded by one in 2013 and four in 2012.
RETENTION RATE CRITICAL FOR VALUATION
Mariner typically buys a majority stake of around 75% in a firm, including a buy/sell agreement for the remaining portion with the local owners, Bicknell says.
Valuations are determined by a multiple of EBIDTA, as well as factors such as the firms' growth rate, age of the clients, concentration of clients' AUM and client retention rate. The latter is especially important, Bicknell says - "We want to make sure the clients stay."
Well-run firms with between $500 million and $1.5 billion in assets will be much sought-after this year, according to Bicknell. "It's absolutely a sellers' market," he says. "They're the ones we all want."
Vantage's 14 person team is led by Robert Thomas, the firm's president and chief executive officer. Partnering with Mariner, "will allow the whole Vantage team to continue on our growth trajectory while focusing, first and foremost, on serving clients, Thomas said in a statement.
Despite the attention given to M&A activity, organic growth, driven by Mariner's business development team, accounted for the highest percentage of Mariner's revenue increase last year, according to Bicknell. "I see no reason for that not to continue," he says.
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