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How to Attract Buyers for Your Wealth Management Firm

Mike Langford
Apr 22, 2019

There’s an old axiom in the mergers and acquisitions world that says “businesses are bought, not sold.”

This axiom holds true for wealth management businesses as well.

Why Are Businesses Bought, Not Sold?

There are a few reasons it is a universal truth that businesses are bought instead of being sold.

  1. The value of the business is often damaged by the mere fact of listing it for sale. If clients, employees, or vendors get wind that your business is on the market many of them will begin to explore other options. It makes sense, their relationship with your business just got a lot riskier and if you are looking for an exit why shouldn’t they consider making a change? This is the reason why business brokers and listing services are very careful to guard the identity of the businesses they represent.
  2. There are surprisingly few buyers for businesses that are looking to sell. This also makes sense. When a business is listed for sale there’s usually a reason and that reason is often a sign that the business is in trouble. It is rare that a vibrant and growing business is listed for sale. The first question a buyer asks of a business listed for sale is “What’s wrong with the business?”
  3. Buyers are looking to fill a specific need when they decide to explore acquisition(s). The buyer is either looking to grow by acquiring another business or looking to acquire talent, technology, or some other improvement to his existing business. Whatever the reason, something spurred the buyer to begin their search for other firms that might be good targets for acquisition. It’s rarely the case that they saw a “For Sale” sign or were convinced to buy by an inbound call from another owner looking to sell his business.

Big Fish Eat Small Fish

Before we jump into what you can do to position your business as an attractive acquisition target to would-be buyers, it’s important to acknowledge another universal truth. Big fish eat smaller fish in almost every acquisition. It is rare that a small firm buys a big one and it’s also relatively rare to see a true merger of equal size firms. If someone is going to buy your business, it is likely going to be a firm that is bigger than yours.

How To Attract Buyers To Your Business

Please indulge me just one more fishing metaphor to set the stage for the approach you should use to attract buyers for your wealth management business. When you go fishing it helps to know both what you are hoping to catch and the environment in which you’ll be fishing. Your deep sea fishing gear isn’t going to do you much good in a rocky stream filled with brook trout. Just as positioning your business as one that caters to the needs of seniors isn’t going to attract many millennial-run firms who are looking for a client base that will grow with them over time.

The best way to position your business for a future acquisition is to start by asking the following questions:

  • Who are the firms in your geographic area that are large enough to acquire your business? This is pretty easy information to discover. What you are looking to do is create a list of firms that will likely have the ability to buy a business of your size. The next step is to refine this list by figuring out which of these firms might find your business attractive.
  • Who would find your client base attractive? Over time, wealth management firms get really good at serving clients with common attributes. This can either be a specific niche, like clients in the tech industry, or clients with common financial situations, like ultra-high-net-worth families. Invest some time thinking about your client roster and who might find those clients to be a perfect fit for their business.
  • Who would find it easy to fold your business into theirs from a business operations perspective and technology perspective? Another lens that buyers look through when considering a business acquisition is the ease of integrating the newly acquired business into their existing business. Things like migrating clients from one broker-dealer to another or convincing clients to abandon your old portfolio models for new ones can increase the risk profile of the acquisition. Similarly, if your business is running legacy technologies that will require a lot of work to convert to more modern solutions that can be a problem for a buyer.
  • Who would find your location attractive? Some buyers are looking to expand their business to new locations either because the city or town is an attractive, growing locale or because they want to diversify their dependence on their current location. For example, a wealth management firm in Austin, TX may want to explore buying a smaller firm in Horseshoe Bay a nearby, high-end resort community.
  • Who would find your team attractive? In an ideal situation, a member of your team would acquire the business from you through a succession plan. But, maybe your team isn’t ready for the challenge or they simply aren’t interested in becoming business owners. That doesn’t mean your team isn’t valuable. In fact, your team and their client relationships, as well as their business capabilities, are what the acquiring company is really buying from you. Take a look at what they bring to the table and look at the teams of would-be buyers on your list to see how they would improve their business.

If you are struggling with finding a fit through the questions above now would be a good time to start working on these areas. There is a massive wave of advisors who will be looking to transition out of the business in the next few years and buyers will have their pick to choose from.

Assuming, however, that you were able to successfully create a list of prospective acquirers from the process above your next step will be to start engaging with them regularly as networking partners. Take the lead and reach out to ask the owners to join you for golf or some other event. Hoost a mastermind group for an “exclusive” group of wealth management firm leaders. The goal is to position yourself as a valuable peer to your future suiters so that eventually one of them will present themselves as the right acquisition partner for your business.

In many cases, this is how businesses are bought. The owners know each other and at some point in time, the fit reveals itself. But that doesn’t mean it didn’t take work to get there. If you want to have someone buy your business someday, start preparing to attract buyers today.



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