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Inside the Deal M&A Podcast Part 2: Execution

Zero in on RIA deal execution behind closed doors and learn best practices for RIAs contemplating a sale. Harris Baltch, Dynasty's Head of M&A and Capital Strategies, is joined by Liz Nesvold, Managing Director and Head of Raymond James' Asset and Wealth Management Investment Banking Unit, to discuss how to execute RIA M&A successfully.




Recently, we examined how RIA owners can most effectively prepare for an M&A event. This time, we zero in on deal execution to show what happens behind closed doors and provide best-practice tips for RIAs contemplating a sale.

To help us, I sat down with one of the most accomplished RIA deal-makers around. Elizabeth Nesvold is managing director and head of Raymond James’ Asset and Wealth Management Investment Banking unit. The following is a summary of our discussion.

Listen to the podcast

RIA-oriented M&A activity continues its strong pace in 2021, traceable to three main forces:

  1. Pent-up deal flow from the first months of coronavirus lockdowns in 2020
  2. A desire to get deals done in case Congress moves soon to raise capital gains taxes
  3. A big demographic shift motivating RIA owners to sell

The last point needs elaboration. Many RIA owners are baby boomers, and many baby boomers are thinking about retirement, or at least taking a step back. As a result, they wish to maximize the proceeds from a sale of their practices.

Fortunately for them, there’s unprecedented interest in acquiring RIAs from players attracted by:

  1. Recurring revenues from wealth management fees
  2. The potential to realize greater cumulative value through scale
  3. The prospect—circling back to boomers—of retirees and near-retirees needing financial advice through the next few decades

Whatever the motivation to buy or to sell, RIA sales have clear-cut and predictable structures.


Elizabeth Nesvold

“There Is a Beginning, There Is a Middle, and There Is an End”

“There is a beginning, there is a middle, and there is an end of the process,” says Nesvold. In this view, the beginning is all about preparation, and the middle is “engaging the market and making sure that you've thought about the partners that are out there, how you interact with them” followed, near the end, by “confirmatory diligence”—in effect, making sure things are as they first appeared—“as you get into the third phase of the transaction.”

In outline, selling an RIA is similar to selling a house. “You're thinking about what a third-party would see,” Nesvold says. “Is the faucet leaky? Do you need to re-shingle the roof? How do you position it? What is the curb appeal?”

Then you get to the middle phase of selling a home. You engage a broker who conducts showings for potential buyers. An indication of interest may lead both parties “into the documentation part of the process and closing elements,” says Nesvold.

But Nesvold warns you can’t simply tick through these action items and hope for an optimal outcome. “Diligence is the No. 1 thing that we need to do,” she says. “Who are you? What do you look like? What do you bring to the party? And how do we position that?”

Each phase typically taking two to three months, says Nesvold.

Wish Lists, Price Tags and Degrees of Integration

As a result, it’s vital to understand the market, which consists of many different players, among them:

  • Other RIAs
  • Private equity investors (direct or via PE-funded acquisition platforms)
  • Banks and trust companies
  • Strategic integrators
  • Family offices

The choice often comes down to the seller's "wish list.” If your priority is to diversify away from a business that represents your life’s net worth and sweat equity while maintaining your independence, “you're not going to be talking to a strategic integrator," says Nesvold. On the other hand, if you want to focus on, say, business development, and "you hate the compliance element and signing off on tech expenditures, and hiring people," then you're more likely "to want to partner with somebody who can let you be what you want to be and really fit you into their model."

Other considerations are the size of the stake you're willing to sell and how integrated you want to be. This range stretches from "non-integration to 100% full integration," says Nesvold. Being clear on these points, she adds, "makes it so much easier to funnel to the right opportunities."

Another vital consideration is price. According to Nesvold, however, that shouldn't be the sole driver of a deal. "There's no question that price is important," she says. "I am at the table to drive value, but I'd much rather find a balance between fit and value consideration." With those things in balance, Nesvold believes, the resulting deal is more likely to be equitable, doable and enduring.

Finally, the best deals stem from honesty. Don't tell somebody something that isn't true just to position yourself well,” Nesvold warns sellers and buyers alike. “Make sure you're authentic, because I assure you people will see if you’re not.”

Harris Baltch is the head of M&A and capital strategies for Dynasty Financial Partners.

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