Buyer and Seller – Finding the Perfect Match

One could argue that the open market acquisition process is a bit like online dating. Using a finite amount of fields and characters you must convey to someone–whom you’ve never met and know a limited amount of information about–that you are worth their time. That you are worth their time conversing with, spending time together, and potentially making a binding commitment with.

And like dating, finding the right match isn’t about how much someone is willing to spend on dinner, but how many of your attributes complement each other, how well you get along, and how much you trust each other. These matters are paramount to making a relationship work–whether it’s friendship, love, or business acquisition. 

We have spent 25 years in the business of buying and selling financial advisory practices, and it has always been true that most sellers prioritize fit. It can be just as, if not more, important than a buyer’s ability to meet the asking price. Many times, we have seen sellers take offers of less money to go with a better match for themselves and their clients. 

Think about it and look at it from a seller’s point of view (considering a partner’s perspective is very important) . While, as a buyer, you may have completed multiple M&A deals, a seller only sells their business once. For them they are walking away from not just a business, but a community of people that they’ve spent a career building and bonding with. Clients can be like family. How would you feel if you were in their shoes?

WHY IS FIT SO IMPORTANT?

The main reason sellers prioritize fit is because they want to know they’re clients will be supported by someone they trust, someone who is going to care for the clients as they would have. There are other reasons, too. 

Often part of being the best buyer for the opportunity is your ability to provide the least amount of disruption in the transaction. This may mean that you’re willing to continue operating an existing office and/or retain staff providing familiar faces and places for the clients. Additionally, a match in terms of service and product offerings, broker dealer alignment, and custodial network offer a smoother transition. These factors make it easier to transfer ownership of clients’ assets by avoiding some of the hoops that come with repapering or transitioning wealth to different investment platforms.

Lastly, fit is important because you’re going to have to work together to negotiate a deal without headaches and then as partners for a short time to transition the clients. Or, potentially longer if it’s a Sell & Stay situation. Why wouldn’t a seller choose someone they can work more easily with for the duration of a complicated process? Why wouldn’t you?

HOW WILL YOU KNOW IF YOU'RE A GOOD FIT?

The good news is: you don’t have to guess. Like online dating, the open market process starts with an online profile. Even though the seller is anonymous at this stage, each open market opportunity describes the existing business and what criteria they are looking for from their buyer. 85% of your match points are right there in the practice description.

What is most important to a seller is going to vary from person to person, of course, but common criteria sellers consider when evaluating fit include:

• Location
• Service and product offerings
• Licenses and accreditations
• Experience with niche clientele
• Values
• Willingness to maintain an existing office
• Existing team retention
• Broker Dealer
• Custodian

As a prospective buyer, all you have to do is evaluate the business to see if it fits your own acquisition checklist and then communicate to the seller how you meet their criteria in your initial inquiry. Inquiring is not a numbers game. It is truly quality over quantity. Speaking directly to a seller’s concerns and priorities is more likely to get you through to the next phase of the process.

After that, you should be ready to elaborate and demonstrate your fit in next phase if you have the opportunity to have a conversation with the seller. It’s in these meetings that you’ll discover if, as a pair, you have that last 15% of the match.

Fit, of course, is a two-way street. What seems to be a match on paper just might not meld when it comes down to personality and considering working together. And that’s ok, because there are plenty of other opportunities that are a better fit for you. Understanding your own business and priorities for the acquisition will help you determine if an opportunity is a fit sooner in the process. 

Your acquisition strategy should prioritize the right match and focus on meeting the criteria of the type of opportunities you’re looking for. While accessing open market opportunities and moving through the M&A process does not require a membership or engagement with FP Transitions, advisors who leverage our EMS™ membership program typically have higher M&A success rates. This is because they have taken steps to improve their acquisition readiness by :

• Understanding their own business value and KPIs
• Strategizing a well-rounded business growth plan
• Developing a clear acquisition strategy and their own set of criteria
• Leveraging support in crafting inquiry messages, Letters of Intent, and offers