Dynasty Financial Partners facilitated 15 mergers and acquisitions within its network over the past two years totaling $7.2 billion in assets under advisement, but the firm is now making a more concerted effort to source opportunities for its 47 network firms. It’s launching Dynasty Connect to do just that—connect its network firms with sellers in the registered investment advisor marketplace.
“We want to accelerate the pace of deals, the size of deals, and we want to get our network teams—our 47 teams—front and center doing more M&A as a group,” said Chief Operating Officer Ed Swenson. “It’s something that benefits us because it grows the asset base of our clients.”
Dynasty Connect, a free offering to RIAs in its network, puts more of a structure around the M&A and capital strategies platform the firm has been offering. Swenson and his team will source sellers in a geographic region, close to the network firm or those with particular specializations. For instance, Dynasty may look to marry two advisor teams with similar or complementary attributes.
Dynasty will also work with network teams to get them “M&A-ready,” which includes having an updated operating agreement and articulating a value proposition that resonates with prospects and acquirers. The firm will also help with risk management and due diligence on the potential partner.
The firm will also finance the deal, if needed, through its revenue participation note program or a more traditional loan, which would be personally guaranteed by the principal of the firm. Under the RPN program, which Dynasty launched two years ago, an advisory firm would sell up to a 10% revenue stake to Dynasty, in exchange for capital, based on a multiple of the advisory firm’s revenue. That would not be personally guaranteed by the principal, Swenson said.
Swenson, along with other speakers at the DeVoe 2019 M&A+ Succession Summit this week, said he expects the pace of M&A and the number of sellers in the market to pick up in the coming years. In fact, David DeVoe, managing director of DeVoe & Company, said a quarter of RIA owners expect to sell a stake in their firm in the next two years.
“The trend is toward consolidation, so we believe this is a macro trend in which our network needs to be more aggressive in playing,” Swenson said.