Midsize RIAs continue to be pacesetters in the M&A market.

Valley Wealth, a 6-year-old Modesto, Calif.-based wealth management firm with $320 million in assets, is the latest pick-up for United Capital, one of the financial advisory industry's largest aggregators, with around $10.6 billion in assets under management.

The Valley Wealth deal was United's third of the year, giving the RIA 49 offices around the country. United and Valley Wealth exchanged equity, says co-founder JeffBurrow; he and his fellow founder, Jason Gordo, are now managing directors at United. 


With $1 billion RIAs scarce, firms with between $100 million and $500 million in AUM have become prime targets for acquisition, M&A experts noted last month at the Deals and Deal Makers summit conference in Santa Monica, Calif.

A key issue is the search for scale, says Michael Bilotta, managing director for Gladstone Associates -- an M&A consultant that just launched a new analytics platform with different valuation models for advisors.

"The RIA market now is less about rolling in assets and more about mutual leverage, mutual growth, shared intellectual capital and pooled resources," Bilotta says. "The next leap for firms with $500 million or less is $1 billion -- but they can't get there on their own.

"Previously, firms may have been content to rest at $2 million in revenues, but now there's more desire to become larger, more efficient and more proficient," he adds.


Valley Wealth appears to exemplify the trend.

Burrow and Gordo -- who also own FlexScore, an automated financial planning tool -- were pleased with the firm's rapid growth, but wanted to spend more time with clients, Burrow says. That made United's size and independent model appealing, he adds: "We wanted access to a larger brain trust."

The aggregator's ownership structure is divided roughly equally among executives and employees, advisors and investors -- who include Bessemer Venture Partners, Sageview Capital and Grail Partners. Earlier this year, United drew down on funding from private equity firm Sageview to offer stock buybacks of $500,000 or more to 10 advisors who had been with the RIA for at least six years.

FlexScore will remain a separate company, Burrow says, but FlexScore Pro -- which uses  gaming concepts to help consumers make good financial decisions -- will become integrated on United's platform as part of a licensing deal.

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