Despite some high-visibility deals such as the bidding war between Dell and HP for 3Par (Dell withdrew), Kraft's acquisition of Cadbury earlier in the year, and BHP Billiton's efforts to acquire Potash Corp., 2010 deals in general have been low, although improved over 2009. Things are heating up, however; July and August alone accounted for more than $200 billion of the $632 billion in mergers so far in the calendar year.
The financial services arena seems to be an area in which M&A activity is hot. Schwab announced in August that it would acquire ETF manager Windward Investment Management, Inc., for the sum of $150 million in stock and cash. And Ladenburg Thalmann completed its acquisition of Premier Trust, Inc., on September 3.
A number of factors are contributing to investment advisory transactions, which may actually surpass the activity of 2008 by the end of 2010 even though AUM will most likely be lower, thanks to market conditions. Aging advisors looking forward to retirement and others who wish to implement a succession plan before an exit strategy becomes necessary are expected to add to the number of firms in transition. And many factors must be considered in such a transition, preferably before the transition begins.
The issue of value for a planning practice in a merger or acquisition was tackled by Mark Hurley in a June 14 paper titled "Creating, Measuring and Unlocking Enterprise Value in a Wealth Manager," which serves as a guide for advisors or wealth managers who want to sell their firms. The assessments therein may be tough for some advisors to swallow.