Wealth managers interested in selling their firms should not believe the hype about a strong seller’s market, says Dan Seivert, CEO of Echelon Partners, a leading investment banking firm for the industry.
“Everyone thinks it’s a sellers’ market now. If that were true valuations would be really high, but they’re moderate,” said Seivert, who spoke at this week’s Investment Advisor Forum sponsored by the Investments and Wealth Institute in New York City.
“There’s a dearth of attractive buyers but a lot of sellers,” said Seivert, adding that deal terms favor buyers.
Still, the number of deals in 2017 involving firms with more than $100 million in AUM surged to 154 in 2017, capping a 16% compound annual growth rate since 2009.
(Related: RIA M&As on a 5-Year Growth Tear: Echelon Report )
Increased availability of financing has been a big driver of deal activity. In addition, sellers have more access to assistance in deal making and to sales to other wealth management firms, and they have more knowledge about dealmaking, according to Seivert.
For those firms interested in selling, Seivert stressed that “growth is the single most important variable in valuing a well management firm. Growth signals quality, validates a business model, affords financing, allows for both internal succession and sales to external buyers,” said Seivert.
(Related: Echelon Rolls Out RIA Valuation Business)