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July 22, 2020 at 05:17 PM
A large swath of the RIA sector is not prepared to approach merger-and-acquisition deals from a position of strength, according to a new survey from Advisor Growth Strategies, a managing consulting and transaction advisory firm.
The survey results revealed an industry concerned about growth and next-generation talent, but intimidated by the complexity of the M&A landscape.
“We found the majority of RIAs want to build their own platforms and improve sustainability, preferring to outsource compliance, IT and due diligence,” Brandon Kawal, principal of AGS, said in a statement. “But we see a lot of apprehension from advisors who don’t feel they understand the market well enough to command favorable deals.”
AGS conducted the survey in the spring among 96 fee-only and hybrid advisor firms with assets under management ranging from less than $100 million to more than $5 billion.
If Opportunity Knocks
Fifty-one percent of RIAs surveyed said they were unprepared to engage in M&A opportunities, and another 16% said they were only somewhat prepared.
Twenty-three percent of respondents said they had no idea how a deal would be financed, but in any case, 73% maintained that they were unlikely to seek external debt financing in the next 12 months.
The survey pointed to a seller’s market. While a third of respondents said they were very likely to consider an acquisition, only 8% said they were just as likely to consider selling or merging with a partner.
Seventy-one percent of RIAs said finding the right partner was their chief barrier to acquiring another firm. And for 71% of firms considering a sale, their main hurdle was giving up control.
