Ready To Acquire a Practice?

Written by: Jessica Flynn | FP Transitions

“Not So Fast,” says Marcus Hagood, Equity Management SolutionsTM Director at FP Transitions.

The independent advisor mergers and acquisitions marketplace remains largely unaffected by recent equities market volatility and continues to see record-breaking activity across the financial services industry. With greater access to capital and other financing solutions, advisors continue to pursue acquisition strategies at a rapid pace.

“Inorganic growth has been pivotal in the development of the wealth management industry for decades and we continue to see a seller-driven market,” shares Marcus Hagood, EMSTM Director and Senior Consultant at FP Transitions. “Despite the recent ebbs and flows in the market, EBITDA multiples remain strong, and buyers will continue to compete for acquisitions for the foreseeable future.” Given this forecast, Hagood shares that there are a number of areas a hopeful acquirer can focus on to make their firm a more compelling candidate.


Many advisors seeking an acquisition will send out numerous inquiries, cozying up to firms that simply don’t make sense for them to acquire. Most mergers or acquisitions are evaluated based upon their overall “fit” in six core areas: (1) business philosophy and culture, (2) service and client experience model, (3) technology and adaptability, (4) fee structure, (5) investment philosophy, (6) and stakeholder alignment.

When drafting a letter of inquiry (LOI), it’s a great idea to call out areas of alignment among your firm and the one you wish to acquire. Stand-out inquiries will note areas of complementary value, wherein combining your two entities could result in substantial growth, additional revenue streams or a heightened value proposition.

Some examples of improper “fit” could be an insurance-focused firm offering to buy a financial planning-focused firm, or a smaller firm attempting to acquire a much larger firm. For example, in the former, philosophies around services, investments, and client experience could be significantly different, not to mention a mismatch of cash flow, creating a potentially insurmountable workload to meld the two firms together without a robust plan and team to execute. In the latter, while capital may not be the problem, a smaller firm acquiring a larger firm is more about capacity and sophistication. It takes a lot to double or triple in size overnight!

Inquiries that simply state “All cash offer” or “I’ll meet your asking price” are completely missing the point. Today’s winning offers come from a place of alignment in vision and a deeper fundamental understanding of each other’s business. Having a foundation of great trust and steady, respectful communication is vital to the overall success of the deal.


When an owner begins the process of selling all – or part – of their practice, as we just noted, they typically aren’t looking for the highest bidder. They are seeking a comfortable fit, mutual respect, ongoing support for their clients and staff, and so on.

By the time interested buyers submit their non-binding letter of inquiry, they have usually completed a few things. First, they’ve had one or two conversations with the seller, and second, they’ve completed some light due diligence. Less commonly, some may even go as far as an in-person visit, though it’s not required. From a timeline perspective, once the LOI is accepted, the formal due diligence and contract drafting typically takes 45-60 days. Once the deal is closed, then the seller will work to transition clients.

Some factors that influence the overall timeline include financing, agreement upon deal terms, ability to procure documentation swiftly, and clear communication amongst all parties. Practicing patience throughout this experience can really contribute to the overall success of the deal. Patience can reaffirm both parties’ decisions to work together, which is essential as you both enter this life-altering relationship that affects you, your staff, and your clients.


Value is driven by both the numbers and the deal terms, and as we’ve already established, its these deal terms that are most affected by the recent market volatility and rising interest rates. While buyers are still offering full value, we are seeing many buyers and sellers agreeing to more variable deal structures that provide protection for the buyer and an opportunity to recapture value for the seller.

We’re also seeing more and more cases where the owner intends to stay on for several months or years in a more active capacity (Sell and Stay®) to create a smooth transition, and potentially increase the value of their practice. Acquiring an owner, a rainmaker, or key staff can certainly boost the value of an acquisition.


Remember, the biggest financial factors are written into the deal terms. Looking past the EBITDA multiple is critical for anyone entering the M&A marketplace right now. What sounds good in conversation may be a distraction from what’s really on the paper. We often remind advisors that “You shouldn’t be looking at if it’s expensive for the market, but if it’s expensive for you.”

Just as you work with clients on their financial plan, having a thorough understanding of what you can afford in the short and long term, what expenses you can afford to invest in that may be required (such as staff, technology, office support, marketing updates, etc.), and being prequalified for any necessary funding support can all contribute to your confidence and comfort in the months leading up to the close. Being prepared minimizes any personal or emotional undercurrent as you collectively work through the deal terms.

For firms seeking an acquisition as part of their inorganic growth strategy, we recommend doing your homework. Preparing your firm in advance by ensuring the proper structure and measuring your capacity to acquire more clients and staff. Intentionally setting your firm up for success could mean engaging experts like our team at FP Transitions, and depending on your goals, an expert can help you map and fortify your acquisition readiness in the most efficient manner. When the right foundations are in place and you can clearly articulate your long-term vision for your firm, you’ll know the right fit when you see it.

Related: 4 Themes Will Shape Investments in 2023