The mergers and acquisitions market for registered investment advisers continues to be hot, with deal volume breaking new records quarter to quarter. As the RIA industry matures, so does the M&A advisory space. Deal structures are becoming more complex and new, deep-pocketed buyers continue to enter the market.
Jacqueline Martinez has had a front row seat to everyone. Her career began at Joe Duran's United Capital, where she co-led the M&A team with Matt Brinker, former director of business development, and Allen Darby, who found new partnership opportunities for the firm with a strong focus on cultural fit, Martinez said. . which was very important to the success of the firm. At United Capital, she closed and integrated nearly 35 independent RIA transactions with $200 million to $2 billion in assets in the five years leading up to the firm's $750 million sale to Goldman Sachs.
After United Capital was sold, Martinez felt there was a lot that wasn't working about the industry's M&A advisory process. While most RIAs are looking for a good cultural fit, the typical sell-side advisor still uses the financial auction to match buyers and sellers.
“This math-driven review process seems completely inappropriate to me when both sides cite culture as the most important thing they want to get right,” Darby said. “This process does not address culture at all.”
In 2019, Darby created sell-side Alaris Acquisitions to bring the model he used at United Capital to the broader M&A RIA arena. Martinez jumped on board in 2021.
For the past four years, they have cataloged some of the biggest buyers in the industry, from Edelman Financial Engines and Prime Capital Investment Advisors to regional buyers like Modern Wealth. They now boast 75 buyers on their list, with whom they have spent at least 30 hours each, often in their offices conducting quality interviews with their leadership teams. They've collected about 150 different data points on each buyer and compiled it all into an app that they hope will become the 'Google' of wealth management M&A.
“Ninety-five percent of the deals we work on, the founders are not looking to exit,” Martinez said. “They are looking to change the way they work. They're looking to have more resources for their teams, their customers, and just have a new chapter of growth. For these reasons, I believe that focusing on price during the sales process does not deliver that result. But instead, focusing on all the quality elements and the cultural fit, if you will, that's really the best way to do it.”
Alaris defines the best offers as a combination of cultural fit, superior offer and quality of life after purchase. Rather than conducting a blind auction process, Alaris will run a “cultural competition,” using objective and measurable screens against all the data points they've captured on buyers and sellers.
The firm will close its 46th deal in the next two weeks and expects to reach 50 by the end of the first quarter of 2025.