Merger and acquisition activity is increasing in the RIA industry but the activity is not concentrated in firms selling to consolidators. It’s more focused on advisors merging with other advisors.
Investment News’ Kelli Cruz interviewed Pershing’s Mark Tibergien about the pitfalls advisors need to watch out for in considering a merger or acquisition.
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Tibergien says the main impetus is for firms to achieve critical mass. But advisors wishing to sell have an inflated view of their firms’ value. They become emotional about the transaction and only look at the numbers.
They forget about the cultural aspect of a merger and the time it takes to combine different cultures. They may be so focused on the financial aspect that they overlook whether the two cultures actually are a good fit.
He also says M&A activity will increase. Tibergien views this as a good thing, a growth strategy instead of an exit strategy. Offloading aspects of their businesses to a new partner or sharing part of their businesses can be transformative for advisors.
It’s also another area where all factors should be considered robustly and calmly.
Stepping back and examining the merits with an objective third party consultant might be a good step in assessing the value of partnering with another firm.
Service quality to clients may be a good measuring stick for an ultimate decision.When service quality aligns well with financial benefits, a merger may be worth pursuing.
You can read more about the interview with Tibergien here