What the Advisor M&A Data Leaves Out

Reports are constantly released providing updates about the state of M&A activity in the financial advisory industry. As impressive as this data may seem, it is far from a comprehensive and accurate view of the total number and types of deals occurring each year. This is because much of the data that is provided comes from either larger aggregators or a small number of deal support service providers.

What the Data Leaves Out

Direct Advisor to Advisor Deals

The bulk of M&A deals happen among small and mid-sized practices. These practices may not use an M&A consultant or may have their own in-house person who helps to locate opportunities and negotiate deals. As a result, this segment of the market is often omitted from “industry level” reports.

Internal Equity Purchases/Successions

A growing number of advisors are working toward internal successions. They’ve seen the value of finding a Nextgen advisor to groom into a successor and in breaking their succession out into phases. Sometimes these advisors will secure deal support from an M&A firm, but they just as often work with a private attorney to structure the deal. These private deals are not reflected in the data.

Sunsetting or Internal Acquisitions Within a Broker-Dealer or Custodian

Broker-dealers and custodians have increasingly seen the value of supporting acquisitions and successions internally, so that they can keep client assets and revenues within the firm. Each firm has their own succession or advisor support teams who help advisors who are looking to buy or sell connect with each other. Because these deals happen within a close-knit organization, that data is not reported.

These are just a few examples. Because all this data is not included in the big reports shared by media and M&A firms, advisors do not have a truly accurate picture of the health of the M&A market. Based on our experience as a specialty lender who works with many of the small and mid-sized practices, we have seen M&A activity for internal equity purchases and external acquisitions and mergers continue to grow. Simultaneously, we have seen advisors become more educated and sophisticated in their M&A dealings. As a result, we believe advisor M&A is much more diverse and much stronger than is often reported.

Thus, advisors should take the data with a grain of salt and not use it as a reason to get in or out of the advisor M&A market. The decision to buy or sell should largely be based on what makes financial and strategic sense for your practice, and your ability to do a deal or to tap into resources and experts to help you with a deal. Getting in or out of the game because everyone else is, could put you in a position where you’re either chasing opportunities you’re not ready for, or leaving valuable opportunities on the table.

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