Merger and acquisition volume in wealth management remains sky-high, according to Allen Darby, an M&A transaction consultant, but that doesn't mean the sales and negotiation process has been optimized.
Far from it, says Darby, the CEO of the sell-side consulting firm Alaris Acquisitions, who formerly represented United Capital in its acquisition activities before its own sale to Goldman Sachs in 2019.
"The typical deal process out there looks more like an online auction than anything else," Darby said. "A firm might solicit offers from 75 or 100 different potential buyers. Some of them will sign NDAs and get a closer look, but there is not a lot of nuance. It might result in a seller getting a high bidding price, but that's not the only consideration in a successful transaction."
Darby said he came to appreciate that over the course of more than 35 transactions conducted over seven years consulting exclusively for United Capital — plus an additional nine deals that he had orchestrated in 25 years as a practicing financial advisor.
"Our secret sauce at Alaris Acquisitions is based on our deep experience in buyer identification and seller matching," Darby said. "Ultimately, we believe that bringing a better approach to M&A for both buyers and sellers is important. It results in better outcomes for everyone involved, including the advisors' clients."
The overriding goal is avoiding both buyer's and seller's remorse, ensuring that the acquired enterprise continues to thrive.
The Early Innings
It's best to think about the ideal sales and purchase process in a few phases, Darby said, the first of which starts before any public offers are solicited.
"The very first thing we do when we engage with a potential seller is educate them on the lay of the land and the various steps in the transaction process — so that they're not going to be surprised by anything that comes up along the way," he explained.
Topics to be covered include the broad flavors of buyer models, with a particular emphasis on identifying the pros and cons of each option, as well as the importance of self-reflection by sellers.
Are they simply seeking to maximize the potential sales value? If so, that's fine, Darby said, but it will alter the sales process compared with a more holistic point of view with respect to the future treatment of the advisor, staff and clients.
"We ask, what are they seeking in a partnership and what is their expected autonomy profile going to look like?" Darby continued. "Next, we are going to really organize their financial data, their client data, and all their operations processes and staff."
Ideally, this initial process ensures that the firm understands itself and is understandable to the outside marketplace. Firm leaders can also identify any potential points of weakness in their process and infrastructure before seeking out potential buyers, while also coming to conclusions about their firm's culture.
