Firms such as DeVoe & Company, ECHELON Partners, Berkshire Global Advisors and Republic Capital Group have long been popular in the independent wealth management space for prominent M&A deals, but the sheer number of would-be sellers requires more M&A shops to handle the supply. Meanwhile, the dominance of private equity firms and PE-backed wealth management firms as buyers creates constant demand.
Enter the upstart boutique rivals that have started hitting the market. These include Turkey Hill Management, Hue Partners and Lone Willow Advisors. Of course, scope of resources and brand recognition still matter – especially for wealth management firms with long-term strategic goals, payouts and founder legacies all riding on these deals – so choosing the right M&A shop is a crucial decision.
One consideration for owners of RIAs, broker-dealers and private equity firms is how much direct experience an M&A firm should have with the types of work and transactions that the owner needs. There is no single answer that can satisfy everyone.
For example, some of the M&A experts running upstart boutiques previously mostly worked on large teams with lots of colleagues when serving high-AUM wealth management firms, while others have so far mostly represented smaller firms with their new boutique M&A shops. In addition, some M&A experts currently serving sellers mostly represented buyers before launching their own firms and some M&A experts who now serve buyers mostly represented sellers before launching their own firms.
Owners of new boutique M&A shops who spoke with WSR emphasized the need to differentiate their businesses by finding a good fit with the wealth management firms they serve, not taking on every client that comes their way, and making sure that the M&A expert a client begins the relationship with continues to be the M&A expert the client works with throughout the transaction. In other words, no bait-and-switch handoffs to junior personnel.
They also agreed that, while deal valuations and payouts are important, clients often care more about understanding the firm on the other side of the transaction, as well as how the deal could impact their employees, their end-clients and their own legacies.
Growth Mode Start-up
Jessica Polito founded Turkey Hill Management in 2021, after more than a decade of experience in wealth and asset management M&A, including at Cambridge International Partners. In February, she brought on Matthew Carter, former Director of Wealth Management Services at Stratview Wealth Management, as a Vice President at Turkey Hill. The firm also recently brought on its first analyst, and Polito aims to hire another vice president by year-end.
“We care deeply about the outcome for our clients, and our business model exists to back up that claim. Because we are not driven by a success fee, there is no conflict,” Polito says. “What you see is what you get.”
Turkey Hill, whose clients range in size from a couple hundred million in AUM to several billion in AUM, has gained business through referrals and word-of-mouth. Polito’s M&A firm recently advised the $2.3 billion AUM Charles D. Hyman & Company on its acquisition by Hightower Advisors. Earlier this year, Turkey Hill represented $464 million AUM ClearLogic Financial in its acquisition by Apella Capital. In 2022, Turkey Hill served as financial advisor to $1.8 billion AUM Enso Wealth Management in its acquisition by Choreo.
Her clients’ deal priorities depend on the complexities of their specific firm. For instance, a firm with an average client size of $1 million in assets may have different priorities than a firm with an average client size of $25 million in assets, just as someone who owns 100% of a business may have different priorities than someone who shares ownership among 10 people, and someone looking to retire may have different priorities than someone looking to advance their company to the next stage.
Polito extols the virtues of a fiduciary-like standard of care for M&A clients. “If we get six months into a process and someone decides now is not the right time, we’re not going to try and persuade them to sell their company,” she says. “If they want to go with the third highest bidder because they feel the best about that partner, we’re not going to try and convince them that’s the wrong decision just because we’re not going to make as much money.”
After-The-Deal Focus
In March, veteran buy-side dealmakers Emily Blue and Ryan Halls joined forces to launch Hue Partners, a sell-side M&A advisory venture for wealth management and asset management firms. It provides traditional services for independent firms, guidance to lift-outs and breakaways, as well as consulting for related industries such as insurance and accounting firms. Hue Partners has clients in all three service areas, with a focus on serving wealth management firms overseeing $500 million and above in client assets.
Blue is the former Head of Corporate Development at Caprock. Earlier, she was Director of Mergers and Acquisitions at Mariner Wealth Advisors. Halls previously was Principal, M&A and Relationship Management, at Focus Financial Partners. Earlier, he was Lead Advisor at Venturi Private Wealth.
“What Ryan and I bring to our clients in the dealmaking space is focus on life after the deal, and making sure that the fit between the two firms is a one plus one equals three or more scenario for them,” Blue says. “When you have the deal expertise that Ryan and I have, and combine that with understanding the inside of an RIA, which we have been, that’s incredibly important for founders.”
The duo has found that what clients care about more than deal multiples is the prospect of joining a larger organization, when a team can go from working with a handful of people to potentially hundreds of people. That’s why Hue Partners helps clients connect with potential deal partners, so stakeholders can address several key questions. These include how decisions are made, how conflict is resolved and what happens if financial markets turn over.
Gaining comfort with deal partners – along with their internal processes, product suites, expectations for new team members and overall growth plans – is essential for firm owners to determine whether a transaction would benefit the careers of their advisors and the financial pictures of their end-clients, according to Hue Partners.
“We want to be on the side of the table with our sellers. We never want to be incentivized or motivated to route someone to one firm over another,” Halls says. “There’s enough sellers’ remorse that it makes you pause and want to get this right for the industry, because these are people. This isn’t a factory business. There are no widgets.”
Service Models
Dan Newhall, Principal at Lone Willow Advisors, launched his new sell-side M&A shop for RIA owners in August. He previously served as a Co-Founder at Rise Growth Partners, a minority investment platform for RIAs that Joe Duran officially launched in January. Newhall maintains a close relationship with Rise Growth. Earlier, he held executive positions at Perigon Wealth Management, including as its Chief Business Development Officer.
Newhall argues that RIAs have seen an uptick in M&A activity that is driving the need for M&A consulting services, with wealth management firms that are looking to surpass $1 billion in client assets making inorganic growth a key component of their strategy. CEOs of such firms may benefit from various M&A-related services, depending on their goals.
This can range from retained consulting contracts supporting a firm through a recapitalization process or sale, adding value through operational and enterprise value consulting, as well as helping firms get ready for sale and succession in a manner that is client centric and creates a meaningful legacy, according to Newhall.
“In the case of Lone Willow, we have been on both sides of the fence,” he says. “We have been RIA operators and buyers with expertise in RIA operations, compliance, investments and M&A, so we are able to empathize with the headaches of firm owners who are in growth mode. We have also been involved in both buying and selling minority stakes in RIAs, having hands-on experience with this recapitalization model.”
Newhall continued, “Many of the larger, more established shops will sell a ‘process,’ but I’ve found, having worked with many of them in the past, they are more deal focused with less hands-on experience in RIA operations and M&A, not having been a buyer or seller themselves.”
RIA Perspectives
In order to fully grasp what’s driving the proliferation of upstart boutique M&A shops, the factors that wealth management firms face when considering them, and where the market for M&A firms may be headed, the RIA perspective is essential. WSR turned to Cameron Stagg, Director of M&A at Signature Estate & Investment Advisors (SEIA), and Aidan Walsh, Head of Corporate Development at AlphaCore Wealth Advisory.
As Stagg points out, many of the more than 30,000 state and SEC-registered firms – a vast majority of which are below $250 million in client assets – may lack the time, interest or financial aptitude to entertain a big bank or large consulting practice. As a result, boutiques have a significant opportunity to address a need among middle and lower AUM opportunities. That is, as long as they maintain track records of successful, on time and efficient placement.
Yet the firm’s pricing schematic could make or break the relationship. Smaller firms likely have less free cash flow to spend on consulting services, so it must make economic sense for the firm’s owner to engage a banker versus trying to meet industry players themselves, according to Stagg. Of course, M&A shops still need to know the market, have access to RIA decision-makers and a process that resonates with both buyers and sellers.
Walsh notes that while larger, established M&A firms usually provide the same services as smaller M&A shops, boutiques often excel in offering a more customized and flexible approach due to their specialized focus and client-centric models. This can include more flexibility in investment options and allocations, and ongoing business operations.
As Walsh sees it, although upstart boutique M&A firms are frequently engaged by smaller and midsized wealth management firms seeking tailored advisory services, advisors frequently prefer larger national brands and serial aggregators that can execute at higher multiples, with more capital on their balance sheet, and a proven track record of executing deals in a shortened time window.
Beyond staff experience, track record and fees, it’s crucial for advisory firms considering any M&A firm to speak with previous clients to gain insights into their experiences and any challenges encountered, Walsh suggests.
Future Of M&A Shop Competition
“I foresee consolidation of these small boutiques would pick up,” Stagg says. “We are already seeing it. Silver selling to Raymond James, Park Sutton to Waller Helms to Houlihan Lokey. Larger banks are going to acquire the better boutique banks. There’s excess capacity in the system right now, and consolidation will remove some of the players, creating a more efficient system.”
If the independent wealth management space can sustain both a handful of larger M&A firms and several boutique M&A shops, it is possible that the smaller shops will end up specializing into areas without as much saturation.
“Currently, the M&A market is quite active, driven by private equity-backed wealth management firms with ambitious growth forecasts,” Walsh says. “If there is a downturn in equity markets or a decrease in firm valuations, we might see a shift in market dynamics. In such scenarios, boutique M&A advisory firms could find increased opportunities to assist buyers with sourcing and navigating transactions, as sellers may become more cautious and selective, potentially leading to a greater demand for specialized advisory services.”
Some experts who spoke with WSR indicated that an underserved market such as advisory or advisory team lift-outs could offer long-term viability for boutiques – particularly when the buyer is predetermined and the M&A firm has no need to conduct a competitive process. Even so, they would have to secure high enough payouts for the advisors who will be working at their new firms.
To be sure, the future of competition among wealth management M&A shops is far from certain. Evidence of that was the 2023 dip in total deal flow, the first year-on-year drop for wealth management M&A in a decade. And incumbents are bound to work to grow their market share.
“RIA M&A has been hot for several years, which attracts attention. However, the bar is high for delivering M&A advice,” says David DeVoe, Founder and CEO of DeVoe & Company. “As with any service, brand and expertise is key. RIA leaders want – and deserve – true experts with a history of supporting tens or even hundreds of clients with major decisions like this.”
DeVoe concluded, “New entrants can face a challenge of the perception, and sometimes reality, that they are still ramping up their expertise. The decision to sell externally is perhaps the most important business decision that one can make. Gaining sound advice from a true expert is critical for a successful outcome.”
Larry Roth is CEO of Wealth Solutions Report and Founder and Managing Partner of Ascentix Partners.
