INVEST IN WOMEN | WOMEN IN PLANNING
Are Rates And The Stock Market Hurting The Value Of Your Firm ?
Three merger and acquisition specialists say the market for advisor firms is still robust . By Tracey Longo
THERE IS NO SHORTAGE OF PEOPLE AND FIRMS THAT want to buy just about any size of financial advisory firm , three experts told more than 300 attendees at the Invest in Women Conference , the Financial Advisor magazine-sponsored event that was held in Atlanta in early May .
While multiples — how many times cash flow an acquirer is willing to pay for an advisory firm — haven ’ t changed , rising interest rates and the tumultuous stock market are likely to have squeezed sales prices , said the panelists , which included Kay Lynn Mayhue , president of Merit Financial Advisors ; Francine Miltenberger , managing director of DeVoe & Company ; and Meredith Schwarz , vice president for business development at Wealth Enhancement Group .
So how much have valuations fallen because of rising rates and falling stock prices ?
Since most financial advisors today charge clients based on assets under management ( AUM ), when the market tumbles , so do cash flows , said Miltenberger , who has done M & A for 20 years .
“ When cash flows are compressed , it does have an impact on what buyers are willing to pay ,” she said . “ But what I see in the marketplace is very little change in what buyers are willing to pay in terms of multiples . If someone was willing to pay 12 times your cash flows a few years ago , chances are good they ’ re still willing to pay 12 times now ,” but that multiple will be applied to decreased cash flows , so sales prices have decreased .
18 | FINANCIAL ADVISOR MAGAZINE | JUNE 2023 WWW . FA-MAG . COM