InvestmentNews takes advisers through the developments and innovations in technology that’ll change the way you do business today—and tomorrow.

How technology affects your firm's value

Four key questions to assess your readiness for a merger or acquisition

Jun 3, 2014 @ 10:51 am

By Gregory H. Friedman

+ Zoom

How much is your firm worth? For advisory firms considering a merger or acquisition, the answer to that question plays a large role in how advisers plan for the future of their businesses. One element that's often overlooked during M&A negotiations is how the technology you use in your firm affects its overall value.

The systems and workflows that you've chosen to implement play a large role in bringing firms together and the more organized, complete and automated your business is, the more likely you are to have firmwide adoption. The higher the tech adoption rates in a firm, the more efficient the business.

(Related: 7 ways top-performers sustain their growth)

When I merged my firm in 2009, we meshed a high-touch, boutique practice with a larger firm focused on academic investment expertise — and grew from seven to 25 employees overnight.

Both sides brought significant positive attributes to the table. The firm I merged with was larger and had a built-out management team including a chief compliance officer and a chief operations officer.

My firm was smaller but highly systematized with office workflows; we implemented really efficient and effective technology that gave us an edge with efficiency and client service. Although the negotiations were very collegial, they were also very analytical, and our systems and processes ultimately contributed greatly to the value of our firm.

Aligning the two cultures was just as important as aligning our investment portfolios. Part of that culture was how each firm used technology to manage their day-to-day activities and their client service.

Here are four questions to ask as you assess your technology for a potential merger or acquisition:

1. What are your goals and how do you intend to get there?

What do you want to achieve with your merger or acquisition? Have you considered how suddenly sharing ownership, becoming a minority owner or conceding control of decision making would affect you? Once you have your goals, ask yourself: “What does success look like?” and think about the role technology plays in getting there.

2. How rooted are you in your philosophical beliefs?

Assess how well your approach to client service, growth vs. scale, technology systems and staffing aligns with your prospective partner.

3. How do you run your business?

Adapting cultures is an process, but paying special attention to how each firm works effectively with technology will help when making critical decisions, including how to best use a CRM to centralize the new firm's data and communications. In my merger, both firms used Junxure as their CRM solution and this was definitely a factor in determining how both firms would work together.

(More: How to pick the best CRM)

4. What's the impact on your clients?

How will you communicate this change to clients and how will you maintain or adapt your client service levels to meet expectations? Begin communicating to clients early and often about the benefits of the merger to them and be sure to have a well-thought-out communications plan. Don't overlook the importance of a robust client portal to help deliver the messages.

Even if a merger or acquisition isn't in your succession plans, I can't stress enough how important efficient technology is to a firm's overall profitability. And whatever you decide for the future of your firm, remember that your day-to-day activities directly affect how valuable and attractive your firm is to your eventual successor.

Greg Friedman is co-founder and chief executive of Private Ocean, and president and chief executive of Junxure.


What do you think?

View comments

Recommended for you

Featured Research

The 2015 InvestmentNews Adviser Technology Study

This in-depth study provides a blueprint for the industry, providing actionable information to advisers, along with the latest solutions to help them drive profitability, efficiency and growth for their firm.

Featured video

Consuelo Mack WealthTrack

T. Rowe Price's Brian Rogers: Are there companies you can buy and hold forever?

Brian Rogers, non-executive chairman at T. Rowe Price, says there are just several companies that he stayed invested in throughout his 30-year term at the helm of the equity income fund.

Latest news & opinion

House panel passes bill to replace DOL fiduciary rule with one requiring disclosure of conflicts

Measure likely to continue in partisan advance in House, but could stall in Senate.

Morgan Stanley says recruiting and attrition have slowed down

If wirehouses can successfully reduce their reliance on signing bonuses to recruit brokers, they could increase profits.

Managed accounts look attractive to 401(k) advisers, but how do you measure performance?

The customization that makes them a good investment option presents a benchmarking challenge.

National Holdings' acquisition of broker-dealer WFG Investments and its 200 advisers called off

Under an alternative plan, WFG's advisers will be relocated to three broker-dealers, including one owned by National Holdings.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print