Mergers and acquisitions are a normal part of corporate life. They bring opportunity, but they also pose challenges – and that applies to retirement advisors as well. “Merging Markets: Effective Advisory M&A,” an April 8 session of the 2019 NAPA 401(k) Summit, was the first of a two-part series of sessions addressing the topic. (You can read about Part 2 here.)
The session was moderated by Chad Larsen, President and CEO of MRP and featured panelists Dick Darian, CEO of Wise Rhino Group, and David Stofer, Director, Retirement Plan Solutions, Mariner Wealth Advisors.
Among the challenges and opportunities retirement plan advisors face are:
- Margin compression. The current trend concerning C-Suite services is to provide more and different services for less cost. And, Darian and Stofer add, scaled competitors are facing these changes.
- Evolving/intense competition. Consolidation is resulting in more and bigger branded firms that are better capitalized and professionally managed.
- Growing complexity and shifting service focus. The current trends bring into sharper relief that running a business is not like running a practice. Participant engagement, wellness and building wealth are the keys.
- Opportunities.The current trends spell opportunities for continuity and succession, and consolidation creates opportunities for new partnerships.
Value
Value, of course, is a key consideration. “If you don’t look at value, you’re missing the boat,” said Larsen. And Darian recommended that on day one, you begin to think about the clients you bring in. Do you bring value to the clients? “You can never start that process too soon,” he said.
Darian and Stofer identify the following fundamental value drivers:
- Firm size
- Predictable and recurring revenue
- Profitability
- Expense management
- Client demographics
- Concentration risk
- Turnover
- Tenure
- Organization
There also are variable value drivers that Darian and Stofer identify:
- Owners
- Leadership
- Capabilities
- Niches
- New business processes
- Sociability
- Technology
Additional Considerations
Another consideration is the vision of each of the companies that combine. Stofer suggests that a firm which acquires another must remember the knowledge and experience of the leaders of the company that was acquired. “You want the owner of a bought firm to remain involved at first,” said Stofer.
Employee considerations are important as well, such as staff roles, development and opportunities, wealth, and employee benefits. “Spend a lot of time thinking about employees when a merger occurs,” suggested Stofer.
The culture of the companies is another key. “Get to know the culture,” Stofer further suggested. The people are huge; the culture,” said Darian, continuing, “It’s not just a transaction.” Larsen readily agreed, remarking, “Culture is everything.”
“A lot of this is who you are, and what you want to do,” said Darian.
