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