TRANSITION TALK

One of the fastest ways for an advisor to grow their business is to acquire another advisor’s book of business. Most advisors see this “traditional acquisition” route as a quick and easy way to increase their revenue and managed assets, but if unprepared this growth path can be challenging and technically complex.  

There has also been a significant increase in competition for traditional acquisition opportunities in recent years resulting in the transactions not being as economically viable as in years past–especially for an advisor seeking to use the cash flow of the acquired book to pay for the acquisition.

Luckily, there are a few other strategies that offer the potential for meaningful growth and, over time, might even provide greater enterprise value.  Strategies like mergers, continuity partnerships, equity pathways for next-generation owners (G2 owners), strategic partnerships, and Sell and Stay® transactions offer alternatives for advisors who may not have the enterprise strength or firm depth for a traditional acquisition.  These alternative options take planning and patience, but can yield incredible growth and value in the long run. Many of these strategies also present powerful opportunities to create enterprise value when combined with an advisor’s organic growth.  

“Mergers & Acquisitions” is a phrase that gets used off-handedly, but those are substantially different transactions. An acquisition itself is a complicated enough process. But in a merger there are the additional components required to wholly integrate two separate businesses into one surviving entity.  Those complexities are why each merger engagement presents circumstances and challenges unique to the companies, and individuals, involved. Those complexities can be solved, but the path to the solution is often not apparent to the inexperienced or unwary. 

There are threshold issues a business owner should consider before jumping into the process of merging his or her business with another business. In the video below, two of our transactions experts, General Counsel, Rod Boutin, J.D. and Assistant General Counsel, Ericka Langone, J.D., discuss some of these important considerations.

You took the risk to become independent, hung out the shingle, and spent a myriad of sleepless nights worrying about how to build a business that paid the mortgage. A few bumpy months led to a smoother ride over the years; you now have a strong entity and responsibility over the lives of your clients and employees. As you stabilize, concern shifts from survival to how to perpetuate something that has become bigger than you. Your focus becomes generating growth that secures your future, as well as that of those onboard.

With Growth Comes Challenges

Floyd Green, Founding Partner at Cornerstone Wealth Management in Raleigh, North Carolina faced one of the biggest challenges of his life. Unexpected circumstances forced Floyd to quickly reduce his work hours from 45 to 20 hours a week. Too young to retire and with a staff that had “come to expect a paycheck,” he had to consider how to ensure his business not only survived, but thrived, without him as the sole growth engine.

Thanks to existing relationships, recruiting advisors who shared his vision, values, and passion was the first hurdle cleared; deciding how to effectively incorporate them into the ownership structure would prove more difficult. The issue was not only one of compensation, but also cultivating the motivation and mentality required to be an owner amongst Floyd’s key producers. He wanted to encourage ownership of outcome, a decision-making mindset that considers the future impact on the business.