Buying a Book of Business: How to Acquire a Financial Practice
Whether you are just starting out as a financial advisor or you are simply looking to expand your established business, buying an existing book of business could be the right move for you. Opportunities for business acquisitions are becoming ever more common, as the average age of many financial advisors edges closer to retirement.
How to Acquire a Financial Practice
Those employed as financial advisors will likely come to a time in their career where they would like to make a vertical move. Once this stage is reached, there are few clear paths available. Some may decide to dig their heels in and open their own financial advisory firm, scrounging up clients where they can and providing the best possible service to ensure the success of their practice.
What Low-Interest Rates Mean for M&A in 2022
2021 has been the year of the merger. Coming through the back end of a global pandemic, the world of mergers and acquisitions (M&A) has responded in a record-breaking fashion. In just the first quarter of 2021, global mergers and acquisitions deal-making totaled 1.3 trillion (US) dollars, an increase of 94 percent compared to Q1 of last year. By October, worldwide M&A deals had surpassed 40,000 and 4.4 trillion (US) dollars. According to Refinitiv, a market data provider, this was the strongest opening nine months of any year since records began in 1980. This nine-month total beats 2015’s full-year record of 4.3 trillion (US) dollars. It is safe to say that the final quarter of the year will follow suit.
Mergers and Acquisitions: The Due Diligence Process
What Is the Due Diligence Process? With any merger or acquisition (M&A), there is a level of risk and uncertainty involved with every deal. As a buyer, one of the best ways to mitigate this risk is to get a full understanding of the target company being considered. This is highly important because once a transaction is completed, any issues that the selling company has been experiencing are now the buyer’s responsibility. This is where the due diligence phase comes in. The due diligence process should officially begin once a letter of intent is signed by both parties. At this point we know that both the buyer and seller are interested in brokering a deal, but now is the time to be transparent with relevant and requested information. The due diligence phase is a comprehensive assessment of the books and records of the target company prior to closing a merger or acquisition (M&A) deal. During this phase, the buyer will analyze the seller’s financials, contracts, customers, liabilities, compliance, corporate records, and anything else that is pertinent to the deal and its valuation. The intent of going through the due diligence process is to determine the overall viability of a transaction, for the buyer to feel fully informed regarding the seller’s operations, and for the buyer to have the confidence to move forward with closing the deal. How Long Does the Due Diligence Process Take? Since the information needed is only accessible from the selling company themselves, they are responsible for providing due diligence information to the buyer. A motivated seller should begin putting together these resources as soon as they decide to begin marketing their business for sale. In many cases, however, the organization of due diligence documentation may not have begun until after a letter of intent had been signed by both parties. This pre-preparation (or lack thereof) can impact this phase’s timeline. The amount of time that the due diligence document will take is dependent on a number of variables. Among them is the complexity of the seller’s business, the availability to have a dedicated resource on the task, and how motivated they are to compile this information in short order. It is not uncommon for it to take two to three months to compile a full due diligence report. Regardless of the amount of time it will take, this is a pivotal part of the M&A process and integral to closing the deal. Until due diligence documentation has been provided and thoroughly reviewed, it is not wise to move forward with any M&A transaction. If a deal were to proceed without due diligence, the buyer would be taking on a significant amount of unnecessary risk. What Is a Due Diligence Checklist? Because each organization is different and will have its own method for approaching this information-gathering process, it is important that they develop their own checklist for due diligence. Checklists for due diligence will provide buyers with an organized method to analyze a target company beyond their basic financial statements and allow their business to be viewed holistically. This checklist is important to have because it ensures that relevant information does not go overlooked during the due diligence process. When conducting due diligence during the mergers and acquisitions process, here are common assessments worth requesting (note that the suggestions reflected below are not comprehensive, but rather a starting point): Organization Overview: To get an overall understanding of a company, an overview with supporting documents is beneficial. This includes the business registrations and official paperwork, annual reports, organizational charts, shareholder information, subsidiaries of the company, and an overview of their presence in different states and countries, and more. Sales, Customers, and Revenue Streams: Since the health of a business and its potential for growth are directly tied to its customers and revenue streams, it is important to have a clear understanding of this area. Financial records will tell part of this story, but it is also important to get more information on details around sales patterns, customer loyalty, cost to acquire a new customer, estimated lifetime value of a customer, and who the most important customers are. A buyer will also want to get a sense of the key relationships or partnerships that have an impact on sales and what the status of each contract is. Products and Services: Information on the product and services the target company offers (as well as others that may be in development) should be gathered. Market research or customer feedback that has been conducted for these offerings should also be collected. Having a sense of the profitability and cost of each offer will help determine the ongoing viability of each product. Material Contracts: Review all official contracts, agreements, and arrangements that may impact the business or its subsidiaries. Financial Information: Perhaps one of the most important portions of the checklist of due diligence are the financial records, as financial performance is a primary indicator of the potential for success and continued growth in any M&A deal. Closely review recent annual and quarterly financial statements, projections, outstanding debts, and how they are managing their working capital. Note that these financial statements should be audited and official. If the business has multiple revenue streams, each one should be reviewed individually to determine their value and risk factors. Tax Information: Collecting tax information will provide an indication of how they have leveraged the tax process in the past. This will also help to identify any number of red flags related to their financial situation. At least three years’ worth of a company’s tax returns, including federal, state, local, and foreign taxes (if relevant) should be obtained. The buyer should also request employment tax filings, excise tax filings, and tax settlement documents from the same time period. Insurance Coverage: Get a sense of their insurance situation by reviewing claims from the past three years. A review of current insurance coverage can help determine what is covered and if there are any gaps that
Financial Modeling for Mergers and Acquisitions
Merger and Acquisition Modeling Prior to an acquisition or merger, a merger model (a type of financial modeling) will be used to analyze the combination of the two companies in a proposed deal. The primary objective of M&A modeling is to determine how the acquisition may impact the earnings per share (EPS) of the acquiring company, and how this EPS would compare with others in the same industry. However, M&A models can offer deeper financial insights in any given deal. The financial insights and projections arrived at within the model can help inform whether or not to proceed with a merger or acquisition.
M&A Strategy and Its Alternatives
What is Merger and Acquisition Strategy? Before pursuing a merger or acquisition (M&A), there must be some reflection on how a business intends to leverage an M&A to meet its business objectives. Merger and acquisition strategy allows a business to set a group of parameters to consider and assess to identify M&A opportunities and then determine the viability and value creation potential of any deal.
How Technological Advances are Revolutionizing the World of M&A
As a small business owner, you are a go-getter with a well-thought-out plan for your company. The opportunity to grow and expand your company via acquisition and innovative marketing efforts is the next logical step in your plan. Or do you prefer a different path? One that involves more sand between your toes and less ink on your fingers. You are ready to pass your small business onto the next generation and shift your focus to more relaxing endeavors. But there is so much involved in the process of buying and selling businesses. The integration of technology innovations in the world of mergers and acquisitions (M&A) is striving to revolutionize M&A deal-making processes.
Acquisition Lending to Help Your Business Expand
Expansion through acquisition looks great on paper, but there are a lot of moving parts to address before it can become a reality. The most obvious question is, “Where is the money going to come from?” There are a series of steps required before this can be answered.
M&A Valuation Process: Methods & Support for Financial Advisors
Updated on May 19, 2026 M&A valuation is one of the most important steps in preparing for a merger, acquisition, internal succession, or third-party sale. For financial advisory firms, value is not determined by revenue alone. Buyers and sellers need to understand earnings quality, recurring revenue, cash flow, client demographics, growth trends, transferability, and risk. A well-supported valuation gives owners a clearer view of what their firm may be worth, why it may be valued that way, and what factors could influence the final transaction structure. It can also help identify opportunities to improve enterprise value before going to market, negotiating with a buyer, or combining with another firm. This guide explains the M&A valuation process for financial advisors, including discovery, financial normalization, valuation methods, advisor-specific value drivers, and when to seek valuation support before a transaction. What Is M&A Valuation? M&A valuation is the process of determining the fair market value of a business before a merger, acquisition, sale, or succession event. In the financial advisory industry, the valuation process often considers financial performance, normalized earnings, cash flow capacity, client relationships, recurring revenue, growth trends, and the transferability of the business after closing. A valuation can help sellers understand what their firm may be worth before entering negotiations. It can also help buyers evaluate whether a purchase price is supported by the firm’s financials, risk profile, and future earning potential. How to Value a Company for a Merger or Acquisition When an advisory firm is preparing for a potential merger or acquisition, an objective third-party valuation can help establish a more reliable foundation for decision-making. Owners often have a personal view of what the business is worth, while buyers may focus heavily on risk, transferability, and post-closing cash flow. A valuation helps bridge that gap with a disciplined analysis of the firm’s financial performance, client base, growth trends, and market context. For financial advisors, the most useful valuation is one that reflects the realities of the advisory industry. That means considering factors such as recurring revenue, client demographics, advisor dependency, service model, expense structure, profitability, growth, and the likelihood that client relationships can be retained after a transition. Step 1: Discovery and Data Collection Perhaps the most important part of a valuation is the discovery phase where the owner is able to share detailed information about their company. The business owner is provided with a questionnaire that will help set the stage for a seamless business valuation process. We then will conduct a 1-hour intake call to discuss and go over the questionnaire responses to fully understand the business in its entirety. In this early stage we will also collect the business’ financial statements, including their balance sheet and/or income statements. This will give us the information needed regarding the business’ capital structure, overall financial performance, investments, and trends. This transparent sharing for information allows us to accurately evaluate and project the value of the business in comparison to others in the industry. During discovery, the valuation team gathers the information needed to understand the business from both a financial and operational perspective. This may include historical financial statements, revenue composition, AUM trends, client demographics, advisor and employee roles, compensation, expenses, debt, entity structure, and any factors that could affect future cash flow or transferability. This stage is important because the quality of the valuation depends on the quality of the information provided. The goal is to understand not only what the firm earns today, but how durable those earnings may be under new ownership or after a merger. Step 2: Recasting Financial Information and Normalizing Earnings After discovery, the valuation process typically includes a review of historical financial information to identify normalization adjustments. The purpose is to better understand the firm’s sustainable earnings and cash flow capacity, not simply the numbers shown on the most recent income statement. For example, a valuation may consider whether certain expenses are one-time, discretionary, excessive, owner-specific, or unlikely to continue after a transaction. This could include non-recurring revenue or expenses, unusual bonuses, personal expenses running through the business, above- or below-market owner compensation, non-essential vehicles, or other items that may distort the firm’s true profitability. Normalizing earnings helps buyers and sellers evaluate the business on a more consistent basis. It can also reduce the risk of undervaluing or overvaluing the firm based on financial information that does not accurately reflect ongoing operations. Step 3: M&A Valuation Methods There is no single valuation method that applies perfectly to every advisory firm. A strong M&A valuation considers multiple data points and evaluates which methods are most relevant based on the firm’s size, financial performance, growth profile, client base, and transaction purpose. Income ApproachThe income approach estimates value based on the firm’s expected future cash flows. This method is especially useful when a firm has recurring revenue, stable margins, and enough financial history to support forward-looking projections. Market ApproachThe market approach considers valuation ratios and transaction data from comparable businesses or transactions. In the advisory industry, this context can be especially helpful because market expectations may vary based on revenue mix, profitability, growth, client demographics, and risk. Asset ApproachThe asset approach considers the fair market value of a company’s assets and liabilities. For many advisory firms, this approach may be less central than income or market-based methods because much of the firm’s value is tied to client relationships, cash flow, and enterprise goodwill rather than hard assets. Step 4: Comprehensive Analysis and Valuation Reporting A valuation report should do more than state a number. It should explain the factors that support the conclusion and provide context for how the firm compares to relevant benchmarks, market data, and transaction considerations. A comprehensive advisory firm valuation may include analysis of: Company structure and ownership Financial performance and normalized earnings Revenue mix and client demographics Growth trends and business development Industry and market conditions Economic outlook Client retention and transferability risk Benchmarking and key performance indicators Transaction considerations that may affect value Key Value Drivers in an
M&A Support: What, When, How, and Why
Updated on July 20, 2026 Mergers and acquisitions are team activities. Surgeons don’t go into the operating room without nurses and anesthesiologists. Business owners shouldn’t enter into an agreement to sell or merge their business without M&A support.