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Tales from the trenches: Forging ahead with M&A

Buying or selling a practice can be fraught with danger, so advisors on either side should proceed with the utmost caution.

Advisors should first thoroughly understand why they are really seeking to team up with another firm, says Kevin J. Meehan, regional president of Wealth Enhancement Group in Itasca, Ill.

“Will I be better positioned for issues I might be concerned about like growth, succession, client service, investment performance, broadened services?” he says. “As those whys are understood, that gives you focus as to whether being together versus being apart is the answer to your greatest concerns.”

To make any merger successful, the acquirer must have a thorough transition plan and expect that the new advisor will want “a seat at the table” on decisions and the future firm’s direction, Meehan says.

“If they don’t, it is unlikely to work,” he says.

When seeking to buy independent firms, perhaps the most important thing to look for is cultural fit of the advisor, says Alan Moore, founder of Serenity Financial Consulting in Milwaukee, which is part of Abacus Wealth Partners.

“We focus on social-impact investing and have a very relaxed environment, so bringing in an older advisor that is searching for alpha wouldn't make sense for us,” he says.

One of the keys to buying firms is making sure that the due diligence process is complete, says P. Jeffrey Christakos, a planner at Westfield (N.J.) Wealth Management.

“You are looking to add clients that will dovetail with your current base,” he says. “The investment and financial planning processes used by the seller should be similar to yours if you are looking to maximize client retention.”

Moreover, the pricing of the practice should be confirmed by industry experts, he says.

“The world of financial planning is changing quickly, and old pricing models are being challenged as we speak; don’t overpay,” Christakos says.

Phil Corcoran’s firm, The Corcoran Group, last year was bought by Savant Capital, and he is now managing director in Savant East in McLean, Va.

The decision to sell the firm to Savant occurred for several reasons, including that he wasn’t getting any younger.

First, Corcoran obtained third-party valuation to make sure he wasn’t overstating or understating the firm’s value.

In addition, he knew what he was looking for, having had a few conversations in the past with other registered investment advisers during which he realized they weren’t great fits.

Corcoran then worked with an executive coach to help make his decision “and to work toward ‘yes’ because there are many opportunities to land on ‘no,’” he says.

Corcoran now helps Savant look for other firms to buy.

“Savant’s approach is selective acquisition at a reasonable price,” he says. “We are not a roll-up firm, where the main objective is doing M&A deals and increasing AUM at a rapid pace, with no real concern for the organization’s ability to function at a high level after.”

Katie Kuehner-Hebert is a freelance writer in Running Springs, Calif. She has contributed to American Banker, Risk & Insurance and Human Resource Executive.

This story is part of a 30-day series on smart ways to grow your practice.

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