Mergers are transactions that can take on many shapes, apply to almost any size advisory enterprise, and are infinitely customizable depending on the unique details and situations of the participating advisors.
Advisors commonly think of a merger as the statutory combination of two practices into one in a tax efficient manner, but it’s better to think of the merger process as the combination of two or more advisors’ strengths, client bases, and cash flow streams, while reducing or eliminating weaknesses and inefficiencies – lofty goals to be sure, but readily achievable.
The reality is that mergers can be used to address a much wider set of challenges and opportunities including:
- Growth through acquisition (i.e., by merging a small practice into a larger practice, and then setting up an internal succession/continuity plan);
- Finding a successor, or becoming a successor (by first creating an internal, minority equity partner who later completes the buy-out of the founder’s S-corporation or LLC);
- Establishing a practical and reliable Continuity Plan and protecting the value of your practice against your sudden death, disability or retirement is best accomplished by having an equity partner such as may be created through a merger;
- Improving Enterprise or Revenue Strength through increased efficiencies and the added strengths of other advisory owners;
- Expanding market territory, expertise, and services;
- Building a strong, enduring business by combining the diverse strengths of multiple contributors.
To help illustrate these benefits, consider the following three examples as discussed in our recent Roundtable Talk, “Every Merger Is Unique,” below, each representing an actual merger between independent advisors that we helped orchestrate in 2018: