Celebrating Ellevate's 1st Birthday with an M&A Market Update!

DEAR ADVISORS,

Ellevate Advisors is turning 1 year old this week! My grandad told me that not many people would tell everyone when their business turns one, but I wanted to say thank you to everyone who’s come on this journey with us! It’s truly an honor to serve advisors in financial planning and exit coaching. Every day I’m impressed at how we’re making progress together and truly changing the industry.

I thought it made sense to use this birthday post to give an update on where the market stands now, in terms of average deal terms and the most common challenges for financial advisors in the succession planning space. This month, I got to attend Dimensional Fund Advisor’s Deals & Succession Conference. They shared their annual succession planning survey at the conference, and here are the themes I found most insightful:

• The Going Rate - Even with the pandemic, we’re seeing multiples continue to rise. In the last year, the average advisory firm sold for:

  • 2x annual revenue

  • 6x EBOC (Earnings Before Owner’s Compensation)

  • 5.25x EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

• Deal Breakers - The most common factor we discuss in succession planning is the sales price, but that doesn’t even make the list! The most common deal breakers in priority order qualitative factors.

  • Investment Philosophy

  • Firm Culture

  • Not in the clients’ best interest

  • Not the desired client experience

• Reasons NOT to move forward - On average there are 65 buyers for every one seller. Some sellers are solicited almost weekly by prospective buyers, but they choose not to move forward for the following reasons.

  • They prefer an internal transition

  • Their businesses are not aligned, philosophically

  • The deal terms were not desirable

  • They are not looking to change

• Timing - This measurement is how many months elapsed from the signing of a Letter of Intent (LOI) to the signing of the Buy-Sell Agreement. According to this data, it appears that the longer the deal takes, the less likely it is to close.

  • 50% of deals closed in 0-2 months

  • 37% closed in 3-6 months

  • 10% closed within 7-17 months

• Client Retention Rate - While the deal can close quickly, that doesn’t mean the clients feel a sudden change. There are many best practices we can help our exit planning clients implement to increase their client retention rate above the average, which was only 83%.

• Top Challenges - Advisors are reporting their top challenges, when implementing a succession plan, which are all things we help our clients overcome.

  • Identifying a Successor

  • Time frame to implementation

  • Understanding the succession options

  • Internal financing

  • Capital constraints

Understanding what you’re up against is half the battle. Now, you just need a plan to get on the right track. That’s why we founded Ellevate Advisors 1 year ago this month! Whether you’re just starting out, or having challenges with implementation, we’re here to help talk things through and find a better way. Here’s to many more years of helping financial advisors secure the future of your family and your financial advisory firm!

Warm regards,

Brooklyn

P.S.

At Ellevate Advisors, we believe that advisors deserve to retire too. What does that look like for you, your family, and your business? Let’s figure it out together! Click here to schedule an initial phone call with our team today or get to know me on my bio here!