Since 2019, MAI Capital has made 30 acquisitions and, for the last three years, Managing Partner Rick Buoncore has relied on a well-oiled machine to oversee the transition process. That includes a dedicated integration team, led by a Six Sigma expert and former operations employee, that oversees everything from switching over the acquired firm’s CRM to a review of its investment platform.
But it was not always so at the Cleveland-based firm, which has about $20 billion in assets. According to Buoncore, getting the transition right was a learning process, with he and his partner figuring it out as they went along. “It was neither of our full-time jobs, and it was very difficult,” he says. For the first four deals, all kinds of things fell through the cracks, like getting trades done at the right time or ordering business cards and stationery—before the partners introduced a more systematic process.
Sure, when you’re acquiring a firm, finding the best target, doing your due diligence and negotiating a deal with favorable terms are of critical importance. But all the stuff that happens after the deal is closed to transition and integrate the newly purchased business into the mothership is vital to the success of an acquisition. It also requires a lot of work and a standardized process.
“Integrations are always the most difficult part of an acquisition,” says Scott Hanson, vice chairman of Allworth Financial, a Sacramento-based firm with about $17 billion in assets that has made 29 acquisitions in the past five years. “You need to integrate systems, tech and people.”
A Dedicated Team
Many firms set up buddy systems, pairing employees of their company with an appropriate member of the acquired business. Take Homrich Berg. Since its first merger in 2008, according to President Thomas Carroll, the Atlanta-based firm, with about $13 billion in assets, has assigned a peer mentor in the company to every individual coming to work there from an acquired business—partners are matched with partners, for example, and operations people with operations people.
But the lynchpin of a successful transition at most firms is a team that’s dedicated to the process. At MAI, once a letter of intent is signed, the 10-person team’s leader meets with the head of the acquired firm to discuss expectations for the next 90 days, 120 days and six months. Formed in 2020, the integration committee includes project management experts who also previously worked in such areas as advisory and operations. They then enlist the help of the appropriate functional leaders in the organization. Several are former advisors from acquired companies who opted to change roles and become permanent members of the integration team.
Similarly, Homrich Berg originally had an ad hoc integration team that didn’t include anyone from acquired firms. But a year ago, before merging with a firm with $1.5 billion in assets—larger than previous acquisitions—Carroll and his colleagues decided they needed a different structure.
To that end, Homrich now asks acquired firms to choose representatives to participate in meetings with a nine-person Homrich integration committee, which includes the COO, along with people from investments, operations, finance, technology, client service, risk and compliance and marketing to discuss integrating everything from portfolios to CRM systems.
Integration teams also usually oversee training of new staff. Take NewEdge Capital Group. The New Orleans-based firm has $24 billion in AUM, with another $16 billion in brokerage assets—the firm has two RIAs and a broker/dealer—and has made around 20 acquisitions since 2021. Each divisional head of an acquired firm is trained in how to integrate their own team into the larger entity.
In many cases, discussions include activities and approaches at the acquired company that could be transferred over to the combined firm. At MAI, if an acquired firm is using an investment fund not on its platform that its clients like, then a management review committee will evaluate it and may add it to the platform, if it meets the right criteria. At other times, the acquired firm will need to stop using certain funds and switch to similar ones that are part of MAI’s roster.
When problems come up, they usually involve data or technology. “You’re not just flipping a switch,” says Alex Goss, co-managing partner of NewEdge Capital. “It doesn’t happen overnight.” MAI spends anywhere from three to six months running the acquired firm’s systems in parallel. Some software is simply more difficult to integrate. Moving financial planners to MAI’s eMoney planning software happens almost immediately, for example, while portfolio management systems take a lot longer.
For Goss, the most important part of the transition is culture—specifically, “Making sure everyone feels good about the merger,” he says. “Only a few people in the new firm made the decision to sell and you’ve got to convince the rest of the people.” The central ingredient: Delivering on what you promise. “If you say you’re going to do something and you don’t, it’s very hard to gain their trust after that,” he says.
Goss starts with a meeting at which he discusses what will change or stay the same and the areas that might be a little bumpy. He also urges his new employees to speak up if something doesn’t go as planned.
In fact, according to Goss, hiccups can be useful opportunities to build trust. He points to a recent acquisition of an RIA with $800 million in assets as a case in point. Thanks to a mix-up with client registrations, it looked like the acquired firm was going to have to ask clients to sign new paperwork, something they wanted to avoid. So Goss and his colleagues worked with the custodian to help smooth over the problem by making an exception. “It was almost better than it would have been had everything worked perfectly,” says Goss. “(The new employees) knew we did everything we could to fix it.”
A Slow Build
For firms that haven’t built a transition process yet, veterans of these efforts warn that it’s not a quick fix. “It takes time to build a M&A machine,” says Goss, whose firm receives possible deals from 10 to 15 investment banks every month. According to Goss, NewEdge spent about a year and a half building a process that could be easily replicated. Nor does completing an integration happen in a few months, according to Goss, who estimates a good two years to complete the work, at least on the advisor side of the business.
At Allworth, according to Hanson, before they formed a systematized transition process, they just asked the leaders of each function take care of the effort. “Essentially, they had another part-time job of doing the integration,” he says. But while they were at it, they also spent a lot of time, especially on the early deals, he says, “Detailing every little process.” Even now, Hanson doesn’t feel it’s all carved in stone. “Every time we do a deal, we debrief,” he says. “We still make changes.”