Don't miss your window! Advisors discuss the best time to buy or sell a firm

Timing, so the saying goes, is everything. And perhaps never more so than when it comes to wealth management M&A where finding the right partner can generate untold synergies - and finding the wrong one can destroy a lifetime of work.

As a result, advisors have plenty of advice for successfully navigating M&A and, crucially, making sure that the deals happen at the right time.

Derek Bruton, managing director and head of M&A at Modern Wealth Management, believes the right time for a seller to seek to be acquired is when they have built "something real," but scaling it further would require key and often expensive hires, more resources, or a stronger succession plan than one would want to build on their own. Put simply, it’s that juncture where waiting longer can mean leaving value on the table.

On the flip side, Bruton believes it’s less about the market and more about the readiness of the purchaser.

“If your platform isn’t ready to absorb and elevate a firm on day one, you’re not ready. The best acquirers know their edge and can unlock value immediately after close. In other words, the ‘right time’ is when both sides can clearly see that staying independent is the riskier move than doing the deal,” Bruton said.

This issue is particularly important given the level of M&A activity happening at the moment. More than half (54%) of RIAs are currently seeking an acquisition, according to a Cerulli report released earlier this month, a share that has grown steadily as firms recognize the window of opportunity. This opportunity is clearly significant - RIA firms with Assets Under Management of at least $5 billion grew their share of the total RIA marketplace to 54% in 2024 from 34% in 2018.

As to the characteristics and metrics of the ideal acquisition target, Bruton believes the key is not to buy growth, but to buy momentum that fits one’s platform. In other words, it starts with alignment and sharing a similar client philosophy.

“Yes, we look for strong recurring revenue, solid EBITDA, real net new revenue growth, and a healthy client base. That’s table stakes. What really matters is the upside. Is there leadership depth and next-gen talent? And are they willing to evolve, or just looking to cash out and stay the same? We’re not buying history, we’re betting on what the business becomes,” Bruton said, adding that legacy technology “doesn’t kill a deal, but it definitely makes you work for it.”

Elsewhere, Allen Darby, CEO of Alaris Acquisitions, feels the best time to be a seller is well before one is ready to exit, perhaps 3 to 5 years prior at a minimum, and ideally when partners are in the 45 to 55 age range.

“From a value standpoint, you want to address potential detractors 2 to 3 years ahead so the business is optimized before you go to market. With the unknowns of AI looming, we think sellers' currently 3 to 5 years away should be accelerating their timelines,” Darby said.

Other than the subjective cultural aspects of the partnership, Darby points to net new asset growth as the single most important metric – organic growth with market performance stripped out - because that's where buyers generate return post-partnership. Beyond that, a healthy recurring-revenue mix, a blended fee rate in line with services roughly 70 basis points or above, reasonable EBITDA margins between 30% and 60%, and manageable client age and concentration.

“Buyers also weigh Gen 2 leadership heavily for continuity, plus a clean compliance record, since they have to carry your ADV history forward. Straightforward, scalable investment strategies are preferred over exotic ones that read as a compliance and diligence risk,” Darby said.

Finally, Craig Hundt, CEO of Prairie Wealth Advisors, says the timing for acquisition is dependent on the objective of the firms involved. In the case of Prairie Wealth Advisors' recent merger with The McEwen Group, for example, he wanted there to be enough time to work through the finer details before completing the deal. This also helped ensure that following the merger, both clients and staff could acclimate to the transition.

“When considering our recent merger, I wanted next gen advisors with the ability to attract new business, you might say, next generation ‘rainmakers’. Along with that, it was key to bring on an advisor team that has experience working with clients that have complex planning situations,” Hundt said.

Prairie Wealth Advisors announced its strategic merger with The McEwen Group last month, with the combined firm overseeing more than $1 billion in client assets, and serving mass affluent high-net-worth and ultra-high-net-worth families.

As to what firms should consider before onboarding and data transfer, Hundt recommends paying attention to accounts that have lines of credit attached to them.

“If you hold alternative investments, do your homework with the alt managers to see what their process is to hold that alt at your new custodian,” Hundt said.

The message is clear: timing is everything, but seller and the purchaser also need to do their homework and ensure that their respective philosophies, needs, and objectives are squarely aligned.