4 Steps to Take Before Making an Acquisition

A red flag could be something serious, like past violations in an advisor’s history. It also could be something that creates more work than you want, like the process of working through non-competes and transitioning clients with a rep lifting out of a broker-dealer.

3. Study their people.

Employees who are a part of an acquisition can be a plus or minus for your business — and you don’t want the latter.

Begin by analyzing how well your team roles fit together. Will you bring on all the people in the new firm, and if so, do they complement your existing team? If there is overlap between positions, will you need to choose who to bring over with the merger?

Bringing in a valuable team with skills your team doesn’t have is one of the most overlooked parts of an acquisition and merger. Whenever possible, look to add people who are complementary to your existing skill sets.

4. Review the Numbers

At this point, you need to know the business metrics of the other firm by performing a growth analysis.

Review relevant key performance indicators, such as revenue metrics, client demographics, and fee structures. Also, identify the other firm’s processes for financial planning, investment strategy and client experience.

There may be redundancies in systems, which may cause hidden costs that can disrupt an acquisition, which may have seemed like a perfect fit on the surface.

Growth through acquisition isn’t right for everyone. But by taking these four steps, you can answer the “should I buy?” question with increased confidence.

Jarrod Upton, MBA, MS, CFP® is Chief Operations and Senior Partners at Herbers & Company, an independent management consultancy for financial advisory firms. He can be reached at www.HerbersCo.com.