Making an acquisition: a buyer's primer

Jun 25, 2014 @ 12:01 am

By Raymond James

STRATEGY: A very good place to start

The average age of financial advisors in the United States is 57 years old, and within the next decade many of these advisors are expected to retire. What does this signal?


Financial advisors who are not yet considering retirement will have more and more opportunities to significantly increase their client base through acquisition. Currently, we are in a “seller's market” – with anywhere from nine to 48 buyers for every one seller, depending on geographic location. Therefore, as a buyer, you should take steps to increase your chances of getting noticed by a seller. And long term, the opportunities to acquire another firm's practice will continue to increase. So whether you're thinking about expanding an acquisition now or perhaps a little further down the road, it's a good idea to start thinking about what your acquisition strategy might look like. Your first key consideration is to develop a step-by-step plan of action. With this in mind, this paper breaks down each step with an easy acronym to help you remember them: STRATEGY.

  • Step-by-step plan of action
  • Stabilize
  • Target
  • Red flags
  • Advertise
  • Test the water
  • Evaluate
  • Go vs. no-go
  • Yield


Acquisitions aren't easy. There are many moving parts and it can be easy for anyone involved to miss something. To get started on the right foot, the first thing you'll want to do is ensure your “house” is in order. You can't create a plan to bring on another practice if you don't have a plan for your own. The first step is to make sure your own practice is stable and can be scaled for a sudden influx of new clients. You should conduct a thorough review of both your finances and procedures with an eye toward creating an infrastructure for the firm you want in the future – not just the size it is now.

This includes human resource management, marketing, client on-boarding, client service, technological capabilities, and administrative and operational procedures.

Take steps to streamline and stabilize your internal processes so that every aspect of your firm operates swiftly and efficiently. Document your procedures so that you have an established set of guidelines – which can be particularly helpful when adding new clients and/or staff. By having a stable practice that runs like clockwork, you have the best opportunity to successfully integrate an additional, external practice into your firm.

Other stabilizing features may include:

  • -Have an updated, actionable business continuity plan
  • -Evaluate your capacity for additional clients through a client segmentation process
  • -Assess your operational effectiveness by benchmarking against similar sized practices of your peers

Stabilizing your practice can help provide a clearer picture about how you operate and what your current client base looks like. In turn, this will help you better understand what size and kind of practice would be a good fit as an acquisition for your firm.


Carefully consider the practice you want to have in the future, including your objectives for the types of clients you want to help, the services you want to offer, the optimal number of client relationships you can support, and the level of assets under management you want to achieve. This will help you target the existing practices you should seek to acquire to meet your goals.

An exercise that is helpful is to detail your ideal target acquisition in writing, similar to a mission statement. For example:

“Our goal is to acquire a practice with (ex. Firm size – number of clients, assets under management, etc.) ___________________ that focuses on __________________ by _____________.”

Keep it simple but specific when developing an acquisition strategy. Develop “ideal practice” and “ideal buyout terms” scenarios as guides to help you navigate through the next steps. For example, if you are currently a smaller practice and wish to acquire for growth, keep in mind that sellers typically look for a buyer with capacity. Consider starting with a partial-book acquisition or successfully acquiring a smaller practice to boost your legitimacy in a seller's eyes.


While acquiring another practice may be an attractive business decision from your perspective, consider looking at it from a seller's point of view. Imagine how you would (or will) feel when it comes time to sell your practice and hand over clients you've worked with and who have trusted you for decades. Make no mistake; this is not a transaction that's just about money, it's also an emotional process. The seller wants to make sure he or she receives a top price for the practice while also feeling confident that his or her clients are in good hands.

On your end, your enthusiasm to seal the deal needs to be tempered by insuring that you really understand what you are about to acquire. Too much enthusiasm or a sense of urgency imposed by the seller could create a blind spot to any red flags that would signal this may not be the right acquisition for your firm.

That's why, during the pre-acquisition phase, you should begin thinking about the pros and cons of how an acquisition would impact your current practice to help you decide whether it would truly fit with your overall business objectives.

You should have a list of “red flags” that signal the practice you are considering for acquisition won't help you meet your criteria for acquisition. Review this list of “deal-breakers” when meeting with prospective sellers to help you avoid time and energy pursuing an acquisition that won't fit. Both parties can get caught up in the prospect of a deal, only to find later that they had ignored red flags, which can lead to problems down the road. These may include:

  • -The prospective seller is looking for an unrealistic price well above the current market value for his practice or wants the entire purchase price up front
  • -If the practice has more than one owner or partner, consider whether they are all on the same page regarding the sale or if you sense reluctance that may unravel the deal down the road
  • -The seller has a history of regulatory compliance problems (you can visit
  • -The seller has personal financial problems
  • -The seller's client records are incomplete or inconsistent from client to client
  • -The seller has no identity or interests outside of their practice, or aspirations they want to achieve once they sell


After you have (1) made sure your own practice is in order, (2) articulated your ideal acquisition candidates in writing, and (3) developed your list of red flags to avoid, you can begin the search for a seller.

This article was excerpted from the Raymond James white paper "Making an acquisition: A Buyer's Primer".


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