From Founder to Future: Navigating the Human Side of M&A with Emily Blue

It was a big decision, so how did you get there?

[00:00:27] Emily Blue: Yeah, it was a big decision. You know, there's not an investment bank that is out there that I didn't have the opportunity to work with when I was on the buy side. My favorite transactions were always ones that were well represented by an investment bank.

My least favorite were ones where the selling advisor founder was DIYing their process. And there was a moment in my journey on the corporate side where I looked and I said, you know what? There's a better way to run these processes. There's a better way to find life after the deal that's meaningful and fulfilling.

While also making sure they're taking care of their shareholders and that their economic outcome is the best it can be. So I don't think you have to sacrifice one to get the other. And so that was really why we launched Hue. We launched Hue. We did not invent sell side advice. There was other sell side advisors out there.

But we think the way in which we do it is different and results in better outcomes for everybody.

[00:01:36] Doug Heikkinen: I have a bunch of questions about this whole thing, so let me start with, what are some of the most common emotional challenges advisors face when they're considering selling their practice, and how can they best prepare for these feelings?

[00:01:51] Emily Blue: Yeah, the reality is no one's immune to avoiding the emotional elements of an M&A journey. This is a founder's biggest life event, and they've had the ability to stay on the sidelines of their clients and watch them through all of their big life events, whether it's a transaction or retirement, all those different events that their clients experience.

The biggest emotional obstacle that a founder tends to face is that a lot of the times these founders didn't just start out launching a business. They actually were at, you know, on the corporate side being in an, a part of another firm. And so there's a difference in a transition point where they go from founder to transacting and joining another firm as an employee. And the losing control element of what that looks like to them and the fear of that, that is real. And it's something that every founder is going to face. I think some of the best ways in which a founder can prepare for the emotional elements of a transaction is sometimes really simple, but they're sometimes the hardest to implement.

And one of the best is to really spend time journaling. Journaling about what it is that you're looking for, what you're anxious about, what you're excited about. Really spending time throughout each point and milestone of your M&A journey, just in reflection and giving yourself space to think.

And to write your thoughts down. That is one of the biggest differences between a founder that has a more emotional transaction versus one that's really grounded and disciplined and has that north star. That person has created space for them to work through it. A lot of times these founders are running a practice and taking care of client needs all day long and then trying to figure out their biggest life transaction.

And so it is, it's very emotional, but journaling can be really helpful. Being proactive with client communication, being clear on your team and where they're at, where their future career pathing opportunities, if they had more opportunities to explore, where would their skillsets be best used.

That really helps founders get grounded when the emotional heaviness of a transaction starts to weigh on you.

[00:04:20] Doug Heikkinen: So, let's dig a little deeper. How does an advisor's personal identity and sense of purpose evolve or change after selling a practice they've built for decades?

[00:04:32] Emily Blue: You know, there's this fear of any founder that's contemplating selling that if they decide to transact, there's going to be this cliff.

They're a founder today, they're gone tomorrow. The reality is in almost every transaction. The founder transacts and stays right and stays for a period of time. So there is actually, there isn't this cliff that everybody fears in a transaction. Their roles will evolve and look a little bit differently in terms of what they're responsible for.

But that cliff that is so feared when it comes to thinking about retirement or that next chapter doesn't really exist. And this fear of control. You'll hear a lot of founders say, I just don't know if I want to transact because I don't want to give up control. That is actually interesting because when you actually look at what they control post transaction, they're actually controlling exactly what they love. They're controlling the client experience. They're still that, you know that client's first call when something happens and they're still leading the team. Yes, they're not having to process that invoice or deal with the lease, you know, that's coming up for renewal.

They won't necessarily have to worry about controlling those things, but if they're honest with themselves, those aren't even the things that they want to control anyways. They're just things that they have to do as part of being a business owner. And so the worry around control is so real in terms of their identity in that next chapter, but they're able to really control the things that they love to control.

So a lot of the times what a founder will say a year after a transaction is their sense of identity hasn't changed as much as they were worried before transacting.

[00:06:28] Doug Heikkinen: Let's talk misconceptions. What are some of the biggest ones advisors have about the M&A process, particularly regarding the human side of the transaction?

[00:06:39] Emily Blue: Yeah, I, the biggest one that we see in every transaction is when you start, when a founder starts the journey, the word emotional feels like a soft word, right? It feels like something that is foreign to them. They will not experience an emotional rollercoaster of the M&A journey.

That's the biggest misconception, right? No one is immune to natural human emotions. They, they just can't insulate that. And the more that you try, the rougher the journey will be. And so when a founder embraces the fact that there's going to be points where you're anxious, there's going to be points when you lay in bed at night and kind of are worried about, you know, the future or talking to clients or telling the team. That is just normal. And so that's the biggest misconception that founders have. The other is there's, there is this concept in M&A around client consents, and most people worry about is it positive consent or negative consent?

Do I need the clients to sign prior to the transaction closing or do we, is informing as part of negative consent suffice, and that's within their client agreements. But what founders don't realize is that that narrative around what they will tell their clients is something that they really need to think through.

Right? And if they try to avoid, you know, thinking about that, that story, that narrative to their clients and teams that will bubble up and become a stressor later in the process. You know, your clients are going to celebrate this. They're going to be so excited for this event, both for the founder and advisor, but also for themselves, they're going to have expanded services.

And so that, that's a big misconception that we see is this anxiety around telling the clients. But it's often one of the most celebrated.

[00:08:41] Doug Heikkinen: Do you have any stories where addressing the emotional side of a sale led to a better outcome for both the seller and buyer?

[00:08:50] Emily Blue: Yes. We had a client, it was a two partner, partnership.

And both partners were exceptionally talented. They both spent their days very, very differently. One was more, technical, operational investment heavy. The other was much more client business development heavy. And they operated so, so well together because they complimented each other. When it came time to thinking about this next chapter, it creates some anxiety because you know what?

They both view as important in a partnership looks different because they view the world through such different lenses. And so there was some anxiety initially when they started their journey of are we going to actually wind up at the same place and who we think is the great, perfect partner for us.

And they actually, they did a lot of journaling, right? And so at each milestone point, they would write down their reflections and then come back together as a partnership and say, okay, this is what I saw in those conversations, how did you see it? And what's funny is they both individually kind of went through the exercise of assessing the different partners and to their surprise, they wound up very aligned in who they thought the right partner was. And so I think, what is important to remember within advisor firms, sometimes there's other stakeholders and they're looking at the world through different lenses and they have different timelines. They have different objectives and all of that can create emotional strain on a decision that you know is coming up and you don't know how you're going to get there, or if you're going to be aligned or come out stronger, or you're going to get to that point and be worse off.

And. What I can tell you is that when you're open about that and that conversation and seeing things differently from the beginning, you wind up in a better outcome. Now, put yourself in the buyer's shoes. The buyer's experience with these two partners that compliment each other beautifully, but view the world very, very differently.

They got a very, very different experience with those two partners because of the work they were doing behind the scenes with us on getting aligned and having conversations. Sometimes crucial conversations. You know, the harder ones that might be a little bit more uncomfortable, the ones that might have been avoided for a while.

But how the buyers got to interact with this firm was from a state of strength, from alignment. And so it really resulted in such a powerful partnership because of that, the work that was done behind the scenes.

[00:11:45] Doug Heikkinen: Give us some key do's and don'ts for advisors to keep in mind as they prepare to sell their practice, especially from a relationship and trust perspective.

[00:11:55] Emily Blue: Absolutely. The first thing that I would say to do is to know your self. And the best exercise that I think every RIA founder should do, whether they're contemplating a transaction or not wanting to do one for years and years. This is a helpful exercise for anyone to do. Take a blank sheet of paper and write out your perfect day.

What does that look like? What does it look like to come in? What are the things that you want to be doing that leave you at the end of the day walking away going, that was the best day. I feel so energized. And then put that paper down and then look at your calendar and do a check. Where is the, where's the gap?

Like how are you currently, managing your calendar? What are tasks and things and the noise that just fill naturally with your calendar? What do you want to be doing more of? And then if you want to do more of something, the reality is there's, you have to do less of something else. And how do you get the help that you need to align more with how you want to be spending your day. So I think that is a helpful exercise, whether you're selling or not, to know yourself as a leader, something that very few people actually do. The other thing I would do is to really be strategic. Really get specific on what does success look like, what does success look like for you as a shareholder, for your team, and for your clients.

And then put your futuristic hat on. Fast forward yourself into a partnership and put yourself in that mindset. What are you getting more support on? What are you getting less support on? What areas are you growing in? Is your team growing in? Is your clients experiencing from an expansion of services?

And so those things are really, really helpful. The last thing I would do is be clear. Clear is kind. And one of the areas that we see founders get hung up on is when to be clear with their team about M&A. What I always say is it's unkind to dump the news on them if you are not clear as a founder, that one, you are for sure transacting and you are not confident that the partner in which you're choosing to transact with is going to close.

You know, it's a very different mindset as a founder and an owner versus an employee. They may hear that news and go home and lay in bed at night and think, oh my gosh, do I have a job? What is my role? Is my compensation going to change? They may not be saying that to you, but if you announce something too prematurely, it creates a lot of anxiety.

And so that is not me saying don't be clear with your team. But balance being clear and being kind. And so at the point in which you are clear that you are going to transact when you know who your partner, you know, who you're going to be working with, and what that looks like for them, so that you can give your staff the answers to the natural question as employees that you have.

That is what we highly recommend that you do. In terms of don'ts, don't be close-minded. You hear a lot that I would never partner with X, Y, Z firm because of what they look like from the outside or X, Y, Z type of firm, aggregator or small firm or whatever it may be. But you're selling yourself short when you have a closed mind, and so be open-minded. Experience and explore what a large firm could do for you. Explore what a small firm where you have a big role with more responsibilities. Explore both of those. And that is what's going to allow you to get to the right answer. Don't be overly focused on your brand. I always say that your clients are with you because of the name on the back of the jersey, not the front.

They're working with you not because of the name on the firm, but because of who you are and what you do for them. And so that, those are kind of my, my best. The last one I would tell you is don't DIY. You know, this is your once in a lifetime transaction. You owe it to yourself to get the very best advice, both investment banking advice, leading your process, as well as, uh, legal counsel.

Make sure that both of those advisors in your journey are from the wealth management industry and that know this space really, really well.

[00:16:43] Doug Heikkinen: Why is it important for advisors not to wait too long to sell? And how can selling sooner maximize the value for both the seller and the buyer?

[00:16:54] Emily Blue: Yeah, this is, this is a great one. When you think about our industry, wealth management at its core is a relationship business. M&A within wealth management is a talent acquisition business. And so if you wait too long to transact, that is going to meaningfully impact your outcome, both for you, your team, your clients.

It really creates kind of a shock to the system for your team and your clients. Because they're, the, the preparation isn't there. And so we talk a lot in our industry about succession. And how big of a problem succession is. And a lot of the times the problem is because they wait too long. And if you partner early, you optimize your outcome.

You are able to lead your team, you're able to help grow them into their new roles, and your clients are able to transition and get more familiar with the expanded services and get really, really comfortable with this partner firm. What advisors tend to forget is as they get older, they become more and more referable.

The advisor has seen more and more situations and cases and complexities, and so if you transact too late, you don't really maximize that opportunity to partner with a firm and to continue to grow in that final chapter before you retire. And so it is important to really be thoughtful on what your timeline is.

And a lot of the times founders that do transact will actually tell you if there's one thing they could do differently is, why did I wait so long? And so that's important to just remember as you think about your own timeline.

[00:18:43] Doug Heikkinen: There's so many aging books out there. So what opportunities for buyers who are acquiring these aging books of business, especially in terms of engaging the next generation of clients

[00:18:56] Emily Blue: The next generation, creates a huge opportunity for our industry.

And the best thing the wealth management industry can do is start early and be intentional. If you acquire an aging book and you don't start day one thinking about what is the plan for engaging the next generation, you are going to be too late. You know, I always say that if you hold a mirror up to an advisor, oftentimes that's what their client base looks like. You know, they have similar interests. They're in a similar life phase. They, you know, they connect, it's a relationship business, and so they connect on those elements. And so when you think about the next generation, when you hold a mirror up to what the next generation looks like and what they're interested in.

That's what our advice community needs to look like for them. And so it's important for wealth management firms to continue to invest in next generation talent and to help them with business development and education, because the next generation, that's what they're looking for. They're looking for the educational tools and the technology.

And that experience needs to look a lot different to engage the next gen than, you know, the advisor's current aging book looks like.

[00:20:20] Doug Heikkinen: How can advisors plan a fulfilling post-sale life? You talked about advisors who are staying within the practice. How about the post-sale? What are some of the best practices for finding purpose after they exit their practice totally?

[00:20:34] Emily Blue: Yes, this is, this is such an important question and one of the, my favorite books that I give any advisor that is kind of at that point, is called The Soul of Wealth, and it's a book by Daniel Crosby, Chief Behavioral Officer at Orion. And it's a great read. 50 short reflections on the meaning and money.

And if you don't create meaning in your life, the M&A event, of course it's going to bring naturally the money and it, it's your once in a lifetime event. But if you don't create purpose and meaning, then you're not going to be happy. And so the best thing that I can do is start to really think about that.

Think about what, what will make you happy. And so I, it's an opportunity to say, okay, where in the community do I want to be, whether it's philanthropic or you know, supporting the community in which you're living, the relationships that you have with friends and family and all of those things.

We know the ingredients to creating a successful and purposeful and meaningful life. It's just, it's about investing and doing the things that, and pouring into the areas that create that meaning. But I definitely think that's an amazing book for any advisor that's in that position to take a look at.

Because I do think that, you know, starting those intentions of creating that purpose is the sole ingredient that makes all the difference.

[00:22:14] Doug Heikkinen: Last one for you, what are the most valuable lessons advisors have learned from your perspective, from going through this process of M&A?

[00:22:25] Emily Blue: Yeah, I, I think that sometimes the best lessons can be highlighted and illuminated from others advisors that have been in their shoes.

And I think, Doug, you shared an article on Advisorpedia on the solo M&A Myth. And it was an advisor that came and said, listen, I did a transaction solo. I did not have representation. I did not hire a banker, and now I am past my deal milestone, right? The growth earnout has long passed.

They've achieved all the milestones. And the question that was asked was, looking back, now that you know what you know, what would you do? And this advisor said, you know, knowing what I know now, I would've gotten help. I would've, I, I would, I would do the, I would take the advice that I give my prospective clients every day, which is, you pay me a little bit, to save a lot. And that is so true in getting representation for your M&A event. Yes, of course you pay for the service, but the value you get both in deal economics, the right role and structure and all the components to make it a successful, happy event, more than pay for itself. And so I, I think that's a really powerful story that you shared, Doug, because yes, of course you can always, go through the journey alone, but this is your once in a lifetime event, and so you don't know what you don't know, and you don't know if what's in front of you is a pitfall or if the term is, you know, market, below market. And so having somebody help guide you through that process creates a smoother outcome for everyone.

And so, that's the biggest lesson that I think is worth highlighting because it's one that you guys just shared recently and connects with a lot of advisors that are in that spot where they say, do I hire somebody? Can I do it alone? I received an offer from somebody. Should I just kind of keep going down that path?

So I, I think that's really, really powerful.

[00:24:41] Doug Heikkinen: That's great. Stay in your lane, do what you do well and hire others to help you. Right.

[00:24:47] Emily Blue: Couldn't agree more, couldn't agree more. Couldn't have said it better.

[00:24:50] Doug Heikkinen: Emily, thanks so much for joining us. Really valuable information. It was so nice to see you again.

Thank

[00:24:56] Emily Blue: you. Yes. Good to see you. Have a great day.

[00:25:00] Doug Heikkinen: To learn more about Hue Partners, please visit Hue Partners, HuePartners.com. We are on all social media platforms @Advisorpedia. Please give us a follow. For our producer Tory Miller and everyone at Advisorpedia. Thank you for listening.