Jan 13, 2021

RIA Deal Structures & Valuation Trends in 2021

What principals need to consider before selling: An-Interview with Allworth CFO, Chris Oddy

Listen on Apple Podcasts here or scroll down to listen on this page.

You’ve no doubt read about the record-breaking number of mergers and acquisitions in 2020. Both the number and size of the deals make great headlines for financial sector publications. (And with good reason!) But what you may not be as familiar with are the nuts and bolts of these deals. How they come to be. The process of calculating what a firm is worth, and how a selling price is determined. Or even the intangibles of what adds value above and beyond assets under management and clean U4s.

Despite the headlines, many of the most coveted RIAs or Broker Dealer hybrids aren’t managing $2 billion. They are small shops with AUM that is upwards of about $200 million.

That’s good news for principals who have built their businesses but have hit a growth ceiling or need a succession plan or who want something more.

In just the last few years, many partnerships have been formed between one or two person shops and the larger firms with resources and national footprints.

Most advisors know there’s a lot of activity, and while they likely know the number of recent deals has been dizzying, they don’t always know what’s driving them. Key questions like how does a principal know if they’re getting a fair price for a lifetime of hard work? And, how does the recent spate of deals (over 40 in just the 3rd quarter of 2020 alone) impact the process and the asking price?

Is now a good or bad time to sell?   

CFO Chris Oddy is the numbers person behind most of the 12 partnerships that Allworth Financial has entered into in the last three years, and so it’s safe to say he not only has insight into what 2021 is likely to bring, he’s well informed about what principals can do to maximize asking price, get their firms ready to sell, and even what advisors should do in the months or even years leading up to a possible sale to attract the right kind of partner.

Allworth Partner Program’s January State of the Industry Podcast: Valuations, multiples, and deal structures in 2021: What principals need to consider before selling.

On this episode, we welcome:

  • Scott Hanson: Co-Founder, Allworth Financial (Host)
  • Chris Oddy: Chief Financial Officer of Barron’s Top 50 RIA Allworth Financial

Key Takeaways:

  • The reasons behind the blistering acceleration of M&A
  • What kind of multiples are firm owners with $200M to $300M in assets under management seeing in the marketplace
  • What principals can do to prepare for a potential merger or sale
  • Why firms should focus on revenue streams, growth and client mix
  • Why 2021 might be a surprising year
  • Understanding the importance of the distribution of fixed and variable costs when considering partnering with outside investors