InvestmentNews: How M&A deal structures have changed dramatically amid the bear market
The rumors of a potential slowdown of advisory sector M&A due to the bear market have been greatly exaggerated.
Sales are not only up, perhaps shockingly, the multiples being paid are largely holding steady.
But how?
In his latest practice management column for InvestmentNews, Allworth Co-CEO Scott Hanson explains how principals and serial integrators are structuring deals in defiance of 2022’s bear market and corresponding loss of AUM.
From the article …
Despite the bear market, and the decline in firm revenues, the pace of advisor sector M&A has continued to accelerate.
How are all these deals still getting done?
If you’d asked advisors at the beginning of the year what they thought will happen to the pace of consolidation if a bear market struck, most would’ve told you that the number of deals would drastically slow. But not only hasn’t that happened, the number of completed deals will likely set another record this year.
Consistent with the last few years, dozens of deals are still being completed every month. But what has changed is how these deals are being structured. Coming into 2022, deal structures were based upon a few key factors; one being a firm’s valuation. With markets and AUM both high through Q4, advisors were able to use their year-end (2021) revenue run rate and project those earnings into the future.