Why the M&A clock is ticking faster than ever

Why the M&A clock is ticking faster than ever
Firms interested in selling have increased dramatically, but going into the end of this year, it may be hard to find the specialized contractors needed to complete a deal, like bankers, lawyers and accountants.
AUG 17, 2021

If you’re seeking to sell or merge your advisory firm before the end of the year, the clock has begun to tick a little faster.

Our organization has completed numerous mergers and partnerships in the past few years, but we’ve recently seen the quantity of interested sellers increase dramatically, going from one or two inquiries per month to several a week.

What’s behind it?

For one, it’s a continuation of the consolidation trend that we’ve seen ramping up for years. More importantly, at least right now, the huge uptick is being driven by concern about the capital gains tax increase slated for 2022, which is drawing more sellers into the fray.

While it’s impossible to know the precise number of firms looking to make a deal because there is no national registry or multiple listing service for advisory firms, based upon our own experiences, as well as those of several industry experts I’ve spoken with, the supply of sellers may be two or three times as high as just a few months ago.  

On the plus side for advisers, the number of private equity firms interested in our space continues to increase. Some of the world’s largest firms have begun investing. Just recently, Bain Capital announced it was buying a stake in Carson Wealth.

The private markets understandably love the repeatable revenue streams of the wealth business. So the challenge is not finding a good buyer or partner for your firm, it’s getting the deal completed before year’s end.

It’s simply a matter of capacity. Firms have only so much bandwidth to complete a transaction. I know our own firm has been ramping up for the increase, but we too have our limits. While it’s true that there may be more deals completed in the second half of ’21 than ever before, there can only be so many.

That’s because with almost any merger or sale, there are numerous specialized contractors (bankers, lawyers, accountants, consultants, etc.) that need to be brought in. This past week we reached out to one of the Big Four accounting firms that we’ve worked with several times before regarding a larger transaction we are working on. We were told that they couldn’t help us because they were just too busy. Instead, we had to lean on other contacts to get one of the other major accounting firms to pitch in.

We are experiencing the same issue with other types of entities, such as technology and research firms. Everyone is buried. It’s tougher to complete due diligence when you’re having trouble getting experienced firms to assist.

An executive with a PE firm recently told me the supply-demand imbalance may cost them a couple of deals this fall.

If you are contemplating doing something before the end of the year to beat what’s expected to be a substantial capital gains tax increase, don’t wait. Otherwise, you may find yourself with a willing partner but no resources to complete a transaction before Dec. 31.

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with $13 billion in AUM.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.