The supposed "merger mania" among independent advisory firms is not nearly as prevalent as it is perceived to be, according to a study by Tiburon Strategic Advisors, a Tiburon, Calif., consulting firm.
The 102-page research report, released in May, uncovered a total of only 57 transactions involving fee-only financial adviser or investment manager businesses in the past five years.
Tiburon's conclusions were drawn from a case-by-case study and analysis of the deals.
The consulting firm says the acquisition trend is only beginning, however. It predicts more than 500 transactions involving fee-based advisers will take place in the next five years.
Valuations of these firms should continue to inch upward as acquirers bid for prize advisory firms and as more advisers enhance their services to boost values, Tiburon predicts. Fee-based advisory firms will have higher valuations than commission-based providers, the report says.
Cost or revenue synergy will drive successful acquisitions.
The report concludes that a few strategic acquirers will build a nationwide fee-adviser practice. Likely candidates include roll-up firms Assante Corp., Centurion Capital Management, Graver Bokhof Goodwin & Sullivan and Value Asset Management.
Tiburon managing principal Chip Roame adds that banks and CPA firms will also be key players. They are attempting to diversify their revenue streams and are attracted to businesses with recurring fees.
The "Investment Managers and Financial Advisors Succession Planning" report is available for 500 dollars from Tiburon. Contact Chip Roame at 415/789-2541 or Nathan Peters at 415/789-2542.