It’s a good time to be a seller of an RIA firm, at least a certain kind of RIA firm, according to the latest definitive research on mergers and acquisitions activity in the advisory market, though there has been a slowdown so far in 2008 on completed deals.
Those are some of the takeaways from Real Deals 2008, the research conducted by Moss Adams LLC on behalf of Pershing that takes up where its 2006 study on the same topic left off. Summing up the study, the number of completed deals reached 58 in 2007, exactly double the number reported in 2003. However, through April 2008, only seven deals occurred.
Multiples seem to be increasing slightly as well. The typical valuation in terms of multiple of earnings for the average 35 firms per year in Real Deals 2006 was 2.75 to 3.0, while the typical valuation for the average 48 firms in Real Deals 20087 was 2.75 to 3.5 times revenue (Real Deals 2006 covered 2000 through 2005; Real Deals 2008 covered 2006 through 2007).
Mark Tibergien, CEO of Pershing Advisor Solutions and the former Moss Adams partner, provided some insights into the study in an interview, noting that “It’s a good time to be a seller if you have a good business. It’s a bad time to be a seller if you haven’t invested in your business and lack growth and earnings potential.”