Should You Sell Your Advisory Practice on Your Own or Hire a Sell-Side Advisor?
Authors Kristen Grau, CPA, CVA, CEPA, Executive Vice President Kristen Grau is the Executive Vice President of Succession Resource Group, where she leads the firm’s Seller Advocacy program. A CPA, CVA, and CEPA with over a decade of experience as a business appraiser and sell-side adviser in financial services, Kristen has helped sell and transition more than 100 advisory businesses ranging from $40 million to $1 billion in AUM. David Grau Jr., MBA, Founder & CEO David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting firm for financial advisors. A published author, U.S. Navy veteran, and one of the industry’s most recognized voices on advisor M&A and next-generation building strategies, David has delivered more than 200 presentations at leading financial services firms nationwide. Parker Finot, Director of Transaction Advisory Services Parker Finot is the Director of Transaction Advisory Services at Succession Resource Group. With 13 years in the financial advisory space, Parker has supported more than 300 transactions and helped facilitate over $40 billion in transferred AUM through succession plans, acquisitions, and strategic partnerships. Ryan Grau, CVA, CBA, Director of Valuations Ryan Grau is the Director of Valuations at Succession Resource Group. He has been consulting with financial advisors on valuation, deal terms, and M&A strategy since 2011 and holds both the Certified Valuation Analyst (CVA) and Certified Business Appraiser (CBA) designations. Ryan’s team completed 316 valuations in the most recent 12-month period. You can sell your advisory practice on your own, but in our team’s experience you will usually leave something on the table: protections, price, terms or all three. That was the message from Episode 33 of the SRG Exchange, where four of SRG’s M&A specialists compared do-it-yourself deals with sales that have an advocate on the seller’s side. Kristen Grau, who leads our Seller Advocacy team, opened the conversation with what most sellers are facing right now: emails and letters promising 10 times valuation, aggregators pitching easy roll-ups, broker-dealers pushing in one direction or another, and the option of simply finding a buyer yourself. Here are the biggest takeaways from the discussion. What goes wrong when advisors sell on their own? Ryan Grau, our Director of Valuations, said the biggest risk he sees has nothing to do with valuation. It is advisors negotiating deals on their own, usually with one or two people from their immediate circle, and taking shortcuts along the way. In those deals, he has seen confidential information shared with no NDA in place, due diligence handled loosely on both sides, and one-page sale agreements. A one-page agreement can work when two advisors are simply splitting revenue, but as Ryan pointed out, a bank will not underwrite to it. Deals get right up to the finish line and then stall while proper contracts are drafted. His comparison: you can sell a house without a realtor, but a good one markets it, brings in interest and coaches you so the house looks show ready instead of lived in. Selling a practice works the same way. Can you rely on your relationship with the buyer? Parker Finot, whose team supports peer-to-peer deals where the buyer and seller have already found each other, cautioned against leaning too hard on the relationship. He has seen pairs that looked like a perfect fit at the start discover by the end that they were not aligned at all, and the seller ended up selling elsewhere. In another deal he described, a fee-only seller’s clients were all on single-year contracts that had to be renewed manually. The seller planned only four to six weeks of client communication, and there was no adjustment clause protecting the buyer. Trust had dulled everyone’s attention to the details. The deal landed in a good place, Parker said, but only after the team built in real transition support and downside protection. Should fit come before price? David Grau Jr., SRG’s founder and CEO, put it simply: fit matters, but it is not the only thing that matters. In his words, “It’s not fit, fit, fit. It’s fit, price, terms, taxes.” If you lock in a great fit but have no one else to negotiate with, you have probably given up ground on everything else. He compared selling to the one peer you trust to hiring a friend’s son or daughter as a receptionist. The trust is real, but until you interview the other candidates, you cannot honestly tell your clients this is the best person for them. And even if you end up with the same buyer, competing offers help both sides feel good about the price. David also noted a shift in what sellers ask for. Fit used to come first; most conversations he hears now lead with price. Kristen explained why fit still cannot drop off the list: many sellers now stay on for two, five or even ten years after the sale, often going from decision maker to employee. A cultural mismatch at that stage, she said, rarely ends well for the seller, the clients or the team. Ryan sees what happens when it goes wrong. When he is brought in as an expert witness on deals that fell apart, the cause is usually contracts, protections and expectations that were never properly worked out, which opens the door to cherry picking clients, fee changes and lost revenue. Why don’t great offers just show up? After more than two decades of advisor deals, David’s view is that strong offers are built, not received: “Good offers will show up unexpectedly. Great offers, which is what you likely want and deserve, those do not.” David Grau Jr., Founder & CEO, SRG He described an offer from a firm with a couple of billion in AUM that looked like one of those rare great ones, until page four or five. The buyer did not have to close unless 95% of clients signed new contracts first. Picture spending weeks telling clients how excited you are about your new partner,
Contingency Planning for Financial Advisors: Who Takes Over If Something Happens to You? (Ep. 37)
Hosts Julia Sexton, CVA, Director of Strategic Organizational Planning Julia Sexton is the Director of Strategic Organizational Planning at Succession Resource Group, where she leads the firm’s compensation design, equity sharing, employment agreement, talent strategy, and contingency planning programs. A CVA since 2019, Julia has completed thousands of valuations and supported more than 200 successful mergers over her eight-plus years in financial advisory consulting. David Grau Jr., MBA, Founder & CEO David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting firm for financial advisors. A published author, U.S. Navy veteran, and one of the industry’s most recognized voices on advisor M&A and next-generation building strategies, David has delivered more than 200 presentations at leading financial services firms nationwide. Parker Finot, Director of Transaction Advisory Services Parker Finot is the Director of Transaction Advisory Services at Succession Resource Group. With 13 years in the financial advisory space, Parker has supported more than 300 transactions and helped facilitate over $40 billion in transferred AUM through succession plans, acquisitions, and strategic partnerships. Kristen Grau, CPA, CVA, CEPA, Executive Vice President Kristen Grau is the Executive Vice President of Succession Resource Group, where she leads the firm’s Seller Advocacy program. A CPA, CVA, and CEPA with over a decade of experience as a business appraiser and sell-side adviser in financial services, Kristen has helped sell and transition more than 100 advisory businesses ranging from $40 million to $1 billion in AUM. Ryan Grau, CVA, CBA, Director of Valuations Ryan Grau is the Director of Valuations at Succession Resource Group. He has been consulting with financial advisors on valuation, deal terms, and M&A strategy since 2011 and holds both the Certified Valuation Analyst (CVA) and Certified Business Appraiser (CBA) designations. Ryan’s team completed 316 valuations in the most recent 12-month period. What Happens to Your Advisory Practice If You Can’t Show Up Tomorrow? Most financial advisors say they have a contingency plan. Far fewer have one in writing. When David Grau Jr. asked a room of 65 to 70 advisors whether they had a contingency plan, about three quarters raised their hands. When he asked who had a written plan on file with their custodian or broker-dealer, the number dropped to less than a third. A contingency plan covers the exit you don’t plan for: death, permanent disability, temporary disability, or even the loss of your license. In this episode of the SRG Exchange, Julia Sexton, who leads SRG’s contingency planning service, is joined by David Grau Jr., Parker Finot, Kristen Grau, and Ryan Grau. Together they explain how a contingency plan differs from a succession plan, walk through the three most common agreement structures, and share what they’ve seen go wrong when a plan is missing or out of date. The panel closes with the practical steps that make a plan work: set a value someone can actually execute when you aren’t there, update the agreement every year, tell your team, partner, and clients that the plan exists, and structure the sale so your estate is taxed at capital gains rates rather than ordinary income. Key Takeaways Contingency planning and succession planning solve different problems. Succession planning is the intentional, multi-year transfer you choose. Contingency planning covers the exit you don’t choose, so your clients, team, and family aren’t left to figure it out. Triggering events go beyond death. Plans typically cover death and permanent disability, and many also address temporary disability and loss of license. Ryan points out that a family emergency, like a spouse’s illness or a child’s accident, can pull you out of the practice too. There are three common structures. A one-way agreement names one buyer for your practice. A reciprocal agreement has two advisors agree to cover each other. A retainer agreement brings in a firm like SRG to find the best buyer at the time of the event, based on priorities you set in advance. A retainer agreement keeps your options open. Kristen notes that a successor you already like can still be part of the buyer pool. Because SRG’s sell-side team is paid based on purchase price, the goal is the best terms for your family, even when a broker-dealer allows as little as 20 days and lenders often need 45 to 60 days to underwrite a loan. Stale agreements create real risk. The panel shared cases of outdated 2x revenue multiples, contingency partners who had retired or passed away, and right of first refusal clauses that blocked a better sale. Review your partner, multiple, and terms every year. A stated multiple is faster than a valuation at the time of the event. Ryan explains that once the data is in hand, a valuation can take anywhere from a week to 30 days, and pulling that data is hard when you aren’t there. A stated multiple tied to a recent valuation, with clear definitions of the revenue or earnings it applies to, can be put to work right away. Use deal terms, not a discount, to handle attrition risk. Ryan recommends valuing the practice at market and letting the deal terms adjust for clients who don’t stay. Julia adds that when a plan is in place, attrition in these deals tends to be low. Tell people the plan exists, and mind the taxes. Share it with your partner, team, custodian or broker-dealer, CPA, attorney, and family. David cautions against revenue-share arrangements, which can turn the sale into ordinary income, and recommends a buy-sell agreement that can qualify for capital gains treatment. Frequently Asked Questions What is contingency planning for financial advisors? Contingency planning is a written plan for what happens to your advisory practice if you can’t serve clients because of an unplanned event, such as death, permanent or temporary disability, or loss of license. It names who takes over, how the practice is valued, and how the purchase price is paid, so your clients, team, and family aren’t left to sort it out. How is a contingency
Valuation Best Practices: Stop Leaving Money on the Table
Watch the Replay Please enable JavaScript in your browser to complete this form.Please enable JavaScript in your browser to complete this form.First Name *Last Name *Phone * Work Email * Would you like to join SRG’s newsletter to receive industry updates and other webinar opportunities? Yes No Access Recording Why Does Your Practice Have More Than One Value? Because value follows cash flow, and cash flow depends on why you need the number and who you assume is buying. The same practice can be worth $846K to an internal successor and $2.5M to an outside buyer, so the purpose and the buyer come before any multiple. In this session, Succession Resource Group’s Ryan Grau, CVA, CBA, and David Grau Jr., MBA, show what sets the value of an advisory practice and where owners leave money on the table. Ryan and David walk through how valuations work, from binding purposes like lending, divorce, and estate planning to decision-making ones like exit and succession planning. You will see why internal sales price at 7x to 10x EBITDA while PE and aggregator deals can reach 9x to 15x but often pay less than half in cash at close. Ryan separates the drivers that move your multiple, such as recurring revenue, organic growth, client age, and compensation practices, from fact patterns like return on assets that rarely do, and a side-by-side of two $1M practices shows a $1.2M gap. Advisors planning to exit in the next three to five years, weighing an unsolicited offer, or setting up a buy-sell agreement will find this a practical guide to knowing and growing their number. Hosts Frequently Asked Questions What determines the value of a financial advisory practice? Two questions: what the practice earns, measured as recurring revenue or normalized cash flow, and how confident a buyer is that those earnings continue without you. Risk, growth, and transferability set the multiple. Smaller, owner-centered practices are usually valued at about 2x to 3.5x recurring revenue, while larger firms with a team and infrastructure are valued at about 8x to 11x or more of adjusted EBITDA. Why does my practice have more than one value? The purpose of the valuation and the buyer you assume change the cash flows being valued. An internal successor buys standalone cash flow with no synergies, a peer buyer can remove duplicate overhead, and a PE-backed aggregator prices in platform growth. In one example, the same practice was worth $846K in an internal sale and $2.5M in an external sale. Is the headline multiple the price I will receive? Usually not. A higher headline multiple tends to come with more of the price paid later and tied to future results. PE and aggregator deals often pay less than 50% in cash at close, with the rest in earnouts, retention payments, and rolled equity. Compare cash at close and deal terms, not the announced number. When should I get a formal valuation? Ideally three to five or more years before an exit, because the drivers that matter most take years to move. You also need one before bringing in a partner, when setting up a buy-sell or contingency plan, when an unsolicited offer arrives, for lending, and for estate planning, divorce, or a partner dispute. Refresh it every one to two years to measure progress.
Valuation Best Practices: Stop Leaving Money on the Table
Watch the Replay https://vimeo.com/1233895308 Transcript Ryan Grau: Good afternoon. Thank you, everybody, for taking time to join us today. Looks like we still have quite a few people joining, so we’ll give everybody a second here to get settled. Today we’re going to be talking about valuation best practices, and talking to you about understanding some of the key drivers behind your values, some important factors that you need to know about getting ready to have your practice valued, and also interpreting and understanding the outcomes. All with an emphasis on hopefully helping you to stop leaving money on the table when it is time to consider a transaction. So it looks like we’ve got most people here. Numbers have stopped climbing. We’re going to be launching a poll for you here in just a moment. If you wouldn’t mind answering those questions, we would greatly appreciate it. While you’re doing that, I will be the voice in the background talking to you about Succession Resource Group for those of you who are not familiar with us. Succession Resource Group is a one-stop consulting firm, meaning that we don’t have just a laser focus on one discipline. Rather, we have a team of 23 professionals with diverse backgrounds in various areas of expertise. Your presenters today, David and me, Ryan, have slightly different backgrounds. David really focuses more on sell-side M&A consulting, and really everything that you see here in terms of services, because he founded the company in 2012. So David has a very deep understanding of all of these topics. My area of expertise specifically is valuation and benchmarking. That is what my team focuses on, which is why I’m going to be leading today’s presentation with David. In addition to valuation, Succession Resource Group focuses on other services such as succession planning, exit planning, continuity planning, merging practices together, entity formation, restructuring entities if you’re wanting to switch to a two-tier entity system, employment agreements, and compensation design. So again, we do a lot of things for our clients. All of these things generally have one thing in common, which is transacting on the value of your practice, or maintaining, improving, and protecting the value of your practice. So that’s going to be the key part of what we’re going to be focusing on today. David, hopefully I represented SRG well. Anything that you’d want to add? David Grau Jr.: You said it nicer. I know a little about a lot, and you know a lot about a little, which is the nice part about having a full team here, to Ryan’s point. And if and when we get the chance to work together, or, I recognize some of the names on the registration list here, get a chance to work together again, it’s likely because, to Ryan’s point, we just keep everything under one roof. It’s nice to get some expertise in consulting, which we’ve got in spades with, I would say, not one of the most experienced, probably the most experienced team of consultants in the industry when you look at it by tenure. But also just the alphabet soup down there in the bottom left on the accreditations, right? That gives us the ability to not only talk strategy, understand the industry, and go deep on that, but then we don’t have any external handoffs. We can keep the tax side in-house, the legal side in-house. We would never sell based on being a lower-cost solution. But I will say, because we can control the process end to end, like Ryan said, it gives us the ability to actually deliver things more cost effectively, because you just have less stuff getting dropped and you’ve got fewer handoffs. But no, otherwise, you nailed it. We’ve got a team of really smart people here, one of whom is going to lead the conversation today. And hopefully you all have some questions, because with two of us, we get to moderate and make sure we get your questions answered. Ryan Grau: Perfect. So let’s talk about our agenda and what we are hoping you’ll take away from today’s presentation, because we are going to be hammering these topics home today. First and foremost, your practice has more than one value. I know, mind-blowing for a lot of people. But unlike a house or a car, the valuation of your practice is going to follow cash flows, and those cash flows will be determined by the purpose of your valuation and who you’re selling to. Second, there are a lot of key performance indicators that will have an impact on your value. Some of them are more important than others. Some of them are informational. Some are very macro valuation movers, some are micro. So we’ll talk about those different valuation key performance indicators and put them in perspective. Next, headline valuation multiples are not price. Often people read industry publications about what practices are selling for. They talk to a friend at the bar about what their friend sold their practice for, and this now becomes what my practice would sell for. Well, we need to peel back those multiples and understand what went into that transaction, because price is very easily influenced by deal terms. So a 20 times or 15 times EBITDA multiple is not a cash price. It’s not what you’re going to sell to a key employee for. Next, of the KPIs, there is some pretty low-hanging fruit for a vast majority of practices in this industry that you should be focusing on. A lot of these KPIs take time and tactical decisions, but very little investment. Some of them take a little bit of investment to get them buttoned up, and that can unlock tens, if not hundreds of thousands of dollars in risk mitigation in your practice. And lastly, waiting to have your valuation done until you get to a point that you are considering a transaction, or getting ready
Selling in the Next 3-5 Years? What You Need to Do Starting Now
Watch the Replay Please enable JavaScript in your browser to complete this form.Please enable JavaScript in your browser to complete this form.First Name *Last Name *Phone * Work Email * Would you like to join SRG's newsletter to receive industry updates and other webinar opportunities? Yes No Access Recording How Do You Prepare to Sell Your Advisory Firm in the Next 3-5 Years? Start at least three to five years out. Buyers pay for clean financials, sustainable organic growth, a team that runs the business without you, and signed agreements, and each of those takes years to build. In this session, Succession Resource Group’s David Grau Jr., MBA, shows how to raise your value and choose the exit path that fits your goals. David walks advisory firm owners through what actually drives value and how little time three to five years really is. You will see why the window is short (clean financials alone take three-plus years, and the transaction itself can eat a year), and how to read the two valuation lenses without blending them: books under roughly $200M AUM price on recurring revenue at about 3.27x, while larger businesses price on EBITDA in a 6 to 14x range that averages near 10x, and at a 30% margin both lenses land on the same number. He maps the four variables that set your real options (practice size, timeline, buyer universe, and long-term priorities), the buyer types from peers to internal successors to PE-backed aggregators to direct private equity, and why the highest headline number (a PE deal paid 40% cash, 30% earnout tied to 10-20% growth, and 30% acquirer equity) is rarely the best deal. He closes on the value drivers and red flags buyers won’t name out loud, the internal and external exit paths, and the five things today’s sellers wish they had started earlier. Advisors planning to exit in the next three to ten years, weighing an unsolicited offer, or wanting to raise their firm’s value before they sell will find this a practical, data-backed roadmap. Host Frequently Asked Questions How long does it take to prepare to sell an advisory practice? At least three to five years. Clean financial history alone takes three-plus years to build, and the sale and transition can take another year or more. What is an advisory practice worth? Books under ~$200M AUM are priced on recurring revenue (2025 average 3.27x); larger businesses are priced on EBITDA (6 to 14x, averaging ~10x). At a 30% profit margin, both lenses reach the same number. Who buys advisory practices? Peers and third-party buyers, internal successors, PE-backed aggregators, and direct private equity. More enterprise value means more buyers competing and better terms. What lowers a practice’s value? Client concentration, founder dependency, commingled financials, an aging client base, long-term obligations like leases, and unsigned team agreements.
Selling in the Next 3-5 Years? What You Need to Do Starting Now
Watch the Replay Transcript David Grau Jr.: Alright, good afternoon, everyone. Give everyone just a second here. I can never tell if Zoom automatically admits all of you, or if I can actually watch the counter tick up as it admits you one or two at a time. So we’ll give it a second so you don’t miss anything and you’re in the right place. We are focused today on preparing your business to be sold, generically, in the next three to five years. That’s the subject you saw in the invitation email and on the website: build it like you’ll sell it. Because at the end of the day, you’re going to sell your business. You’re going to leave the industry at some point, horizontally or vertically. You and I both know it’s coming. So let’s make sure we can control that process, with a goal of, say, three to five years. If you have a year or two, or you’re getting ready to list with us and want to be done in the next six months, I suspect you’ll still get a couple of good takeaways. They may not all be as broadly applicable, but you’ll still come away with ideas on how to improve the value of your business, or not just the value, but your overall outcome, so you make informed decisions and feel comfortable. Because you’re only going to do this once if you do it right. Our agenda today is to make sure you’re more prepared whenever you decide to sell. Hopefully we get the opportunity and would be honored to guide that process. But whether you do it yourself, five years out, ten years out, or five months out, we want to make sure you have good information, resources, and strategies, so it’s as enjoyable and stress-free as possible. A little housekeeping. Since you’re all registered, I hope you know who Succession Resource Group is. If you don’t and you registered anyway, thanks for taking a flyer on this. Here’s the 30-second version. We’re a consulting and coaching organization, you can pick the label, because we do both. Whether you’re buying, selling, building a more valuable enterprise, or equity sharing with key team members, if it impacts the value of your business, sharing it, growing it, merging it, that’s what we do. You’ll see our core services on the right, everything from valuation to sell-side representation when you’re ready to retire, and everything in between. There’s a lot of room between those goalposts, I acknowledge. We’ve been doing this a while. I’ve been at it since the early 2000s and started Succession Resource Group in 2012. We should probably update this slide, I think we’re at 25 or 26 full-time employees now. The point is, we have a decent-sized team of really smart people. This is not a bunch of admins and attorneys, these are consultants and experts. And you’ll see the alphabet soup of credentials down here. The work we do, valuing, buying, selling, and building more valuable businesses, requires a handful of disciplines. It’s great to have a coach or consultant who knows the industry, and there aren’t many of those, and they mostly all work here, which is why our average consultant tenure is 12, pushing 13 years. But after the consulting and coaching, you have to do the contracts. Once the contracts are prepared, they go to the CPA for tax strategy. Here’s what happens otherwise: you come up with a great strategy with your coach, take it to your attorney to write up, and it’s the first time they’ve written that strategy, so it’s close but not perfect. They ship it to the CPA, who gives feedback to optimize the taxes. It goes back to the attorney, who tweaks it. Then back to the original coach, who says, this isn’t quite what I designed. The rigmarole goes back and forth, and eventually you get some semblance of the original goal, but you’ve spent tens of thousands of dollars to create the 1.0 version. The benefit with us is we control that process end to end. Incidentally, it ends up cheaper in most cases, mostly because we know the strategies. We’ve done this a hundred times, so we give you those documents as a baseline and refine from there. That’s us in a nutshell. All we do is work with independent advisors like you. A few more housekeeping items. Let me hit the agenda so you know what’s coming. Number one, what your practice is worth today: different valuation lenses based on the size of your firm. That sets the table. Number two builds on it: how do you maximize your value, the drivers buyers actually pay for. Tangible levers you can pull, relevant to your size firm, not things you can’t change, like the age of your clients. And then some red flags that could cost you, which buyers won’t always tell you about, because what costs you is good for them. Then we land the plane with the big one: how do you get your value out of the business? If we start too late or don’t have a good monetization strategy, we could have built an amazingly valuable business and still end up selling at a discount, just because we didn’t have enough time. Fourth, I want to make sure you know how we can help. What I’m sharing today, the strategies and the data on the next couple of slides, is either wisdom of the crowd or pulled directly from actual transaction data. On occasion I’ll weave in my opinion, but I’ll flag it. Then we’ll get to your questions. Feel free to use the Q&A panel; we have a moderator watching it, and I’ll save time at the end. There’s a quick poll popping up right now, it helps us bring you better content on future webinars and after this session. The slides are available on request, we don’t blast them out, but
Dealing with Acquisition Risk: How Buyers and Sellers Balance Price, Terms, and Uncertainty (Ep. 36)
Host How Do Buyers and Sellers Account for Risk in an Advisory Deal? Every advisory firm acquisition carries risk, and the higher the purchase price, the more of that risk lands on the buyer. The tools for managing it are clawback clauses, variable payments, and specialized financing structures. Understanding which tool fits your situation is what separates a deal that works from one that unravels post-close. In this episode, David Grau Jr., drawing on more than two decades of closing advisory firm transactions, breaks down the main risk mitigation methods available to buyers and sellers today. He explains why PE-backed aggregators have become so disciplined at structuring high-multiple offers while still protecting their downside, and why any buyer can apply the same thinking. The episode closes with a simple benchmark: in a well-structured deal, both parties should walk away feeling they gave a little too much. If the seller thinks they left some value on the table and the buyer thinks they paid slightly more than they should have, the deal is probably balanced. SRG’s Transaction Advisory Services team helps buyers and sellers reach exactly that point. Key Takeaways Risk scales with price. A clawback clause is a contractual adjustment to the purchase price post-sale, triggered when retention falls below an agreed target. The higher the premium a buyer pays, the more aggressive that target typically needs to be, sometimes requiring 100% retention to justify the price. External deals carry client attrition risk. When a seller moves clients to a new firm, clients must be notified and sometimes repapered. Historically, retention rates in advisory acquisitions run at 90% or above, but on paper the risk is real and needs to be priced into the deal structure. Internal deals carry a different risk: profit erosion. Clients rarely leave in internal successions. The risk is market-driven revenue compression squeezing the margin an internal buyer needs to service their debt. Same dollar of risk, different source. PE firms use a repeatable structure that any buyer can learn from. Roughly 40 to 60% cash at closing, with the balance split between rolled equity in the acquirer and an earn-out tied to 10 to 20% growth targets over four to five years. This is how they justify premium prices while managing their downside, it is not magic, it is structure. Retention clauses have three variables. What you measure (revenue, AUM, or client headcount), when you measure it (typically 12 months post-close), and what the target is (90% for a fair-market deal, up to 100% for a premium). Every other negotiation point flows from these three. Client-based retention clauses are gaining popularity because they factor out market risk. A revenue-based clause can penalize a seller even when every client stayed, if markets dropped 15% during the measurement period. A client headcount clause separates delivery from market performance. A stretch note is an internal financing tool where buyer payments are tied to profit distributions rather than a fixed amortization schedule. If distributions are low, payments are low. The deal cannot structurally fail, making it a strong option for first-time internal buyers. The right outcome is both parties feeling slightly uncomfortable. If the seller thinks they left a little on the table and the buyer thinks they paid a little too much, the deal is probably calibrated correctly. True win-wins in M&A usually mean someone was misinformed. Frequently Asked Questions What is a clawback clause in an advisory firm acquisition? A clawback clause is a contractual provision that adjusts the purchase price after closing if client retention falls below an agreed target. It protects the buyer if clients leave following the sale. The three key variables are what you measure (revenue, AUM, or client headcount), when you measure it (typically 12 months post-close), and what retention target triggers an adjustment. What is the difference between revenue and client-based retention clauses? A revenue-based clause compares revenue one year after closing to revenue the year before. A client-based clause compares the number of households retained. The key difference: revenue is affected by market performance, so a seller can deliver all clients and still trigger an adjustment if markets decline. A client-based clause isolates the seller’s actual performance from market movement. What is a stretch note in an internal advisory firm succession? A stretch note is a seller-financing structure where the internal buyer’s payments are tied to their after-tax profit distributions rather than a fixed amortization schedule. If distributions are lower in a given period, payments are lower. This eliminates the structural risk of a buyer being unable to service debt during a down market, making it especially useful for first-time internal buyers. How do PE-backed aggregators structure their acquisitions? PE-backed aggregators typically put 40 to 60% cash down at closing. The remaining balance is split between rolled equity in the acquiring firm and an earn-out tied to hitting 10 to 20% growth targets over four to five years. This structure lets them offer headline multiples of 10x to 12x earnings while still protecting their downside if growth targets are not met. How long is a typical retention period in an advisory acquisition? The most common measurement window is 12 months following the close of the transaction. Eighteen months is occasionally used. Retention periods longer than 18 months are rare, because client attrition beyond that point is generally not attributable to the transition itself. Hosted By David Grau Jr., MBA (Founder / CEO)
Merger or Sale? Finding the Right Path for Your Exit
Authors “It depends on your objectives.” The right exit path for your advisory firm depends on your objectives, not your firm’s size. A merger and a sale serve fundamentally different goals, and choosing the wrong one can cost you years, money, and the legacy you spent decades building. This article walks through both paths and provides a framework to help you decide which one fits your situation. “Should I merge or sell my firm?” Key Differences Between a Merger and a Sale (Source: SRG Webinar, August 2026) These terms are often used loosely throughout the financial services industry, creating confusion that can complicate exit planning. Understanding the distinction between a merger and a sale is an important first step in determining which path best aligns with your objectives. A merger is a combination of two or more businesses into a single entity with shared ownership and shared control, if intended by the parties. Two firms become one new operating unit. Revenue, expenses, and profits are pooled. Both parties typically stay involved in the business going forward, often for years. Mergers tend to combine operations, reduce duplicative costs, and create growth opportunities that neither firm could achieve alone. A sale is a transfer of ownership from one party to another. The buyer acquires the business, and the seller exits daily operations. A sale prioritizes immediate liquidity and a clean reduction in risk. Once the deal closes, the seller’s ongoing involvement is typically limited to a defined transition period. “A merger isn’t just a smaller sale, and a sale isn’t automatically the better move. The right path depends on what you want your role, your clients, your team, and your legacy to look like once the transaction is done.” Kristen Grau, CPA, CVA, CEPA Why Your Exit Path Shapes Everything That Follows Why This Decision Matters: Seven Areas Your Exit Path Shapes (Source: SRG Webinar, August 2026) The decision between a merger and a sale affects nearly every aspect of your transition, including value, control, timing, client experience, staff retention, tax planning, and post-close obligations. Each of these considerations plays out differently depending on the path you choose. Value. A merger and a sale get valued differently and, more importantly, get paid out differently. In a sale, the purchase price is typically a defined sum paid through some combination of cash at close, a promissory note, and earn-out payments. In a merger, the “price” is usually expressed as an equity stake in the combined entity, which appreciates over time rather than arriving as a lump sum. Control. In a sale, control generally transfers to the buyer. In a merger, control depends on the ownership percentages, voting rights, management roles, and approval requirements negotiated by the parties. Depending on the structure, you may retain significant influence, share control equally, or hold a minority voice in the combined business. Timeline. Some exits wrap up in months with a defined end date. Others keep you involved for 5 to 15 years. The path you choose determines which end of that spectrum you land on. Client transition. How your clients experience the change depends heavily on the structure. A merger can position the transition as a growth story. A sale requires a more deliberate communication strategy to ensure clients feel secure with a new owner. Staff retention. Your team watches closely during a transition. In a sale, staff may face uncertainty about their roles under new ownership. In a merger, the combined entity may create new opportunities, but it can also create redundancies that need to be resolved. Tax planning. The two paths create different tax outcomes. In a sale, the deal structure determines how proceeds are taxed. In a merger, equity contributions can often be structured as tax-deferred events, though the specifics require careful planning. Post-close obligations. A sale typically involves a defined transition period with clear boundaries. A merger means ongoing obligations as a co-owner, including governance, decision-making, and shared accountability for results. “Your exit path isn’t a decision you make once and forget. It shapes years of your life afterwards.” Kristen Grau, CPA, CVA, CEPA The Sale Path: What to Expect The Sale Roadmap: Five Steps from Preparation to Close (Source: SRG Webinar, August 2026) Most advisors think they understand what selling looks like. But the firms that get the best outcomes follow a structured process that starts well before any buyer enters the picture. Step 1: Get the Firm Ready This is the step most advisors underinvest in because it does not feel like progress. There is no buyer yet, no offer, nothing exciting happening. But this is where deals are won or lost. Start by clarifying your objectives. What do you want your life to look like in three years? What does a successful outcome look like for your clients and your team? Without clear answers to these questions, you cannot evaluate any offer against your actual goals. Then get your financials in order. Organize historical and current financial data from sources a buyer can verify. “Sloppy books don’t just slow due diligence, they cost you money. Uncertainty and a lack of organization gets priced as risk.” Kristen Grau, CPA, CVA, CEPA Third, get a formal valuation. A certified valuation report helps you understand your value, what is driving it, and what is putting it at risk. Do this well before sitting across from a buyer who already knows your numbers. Finally, streamline your processes. Reduce how much of the business runs through you personally. Document your workflows. “Every process that is tied directly to you, or goes undocumented, is a discount that the buyer will find.” Kristen Grau, CPA, CVA, CEPA Step 2: Find and Screen the Right Buyer Finding a buyer is not a sourcing problem. It is a screening problem. Advisors receive unsolicited acquisition letters regularly. The work is figuring out which buyers are actually right for you. Screen every buyer against consistent criteria: financial strength, how they are funding the transaction, their plan for your clients
Merger or Sale: The Right Path for Your Exit
Watch the Replay Please enable JavaScript in your browser to complete this form.Please enable JavaScript in your browser to complete this form.First Name *Last Name *Phone * Work Email * Would you like to join SRG’s newsletter to receive industry updates and other webinar opportunities? Yes No Access Recording Should You Merge or Sell? The Right Exit Depends on Your Goals, Not Your Size. In this session, Succession Resource Group’s Kristen Grau, CPA, CVA, CEPA, and Nicole Frey, CFP®, walk advisory firm owners through one of the biggest decisions of their career: whether to sell the firm or merge it. Their throughline is that the right path depends on your objectives, not your firm size. Kristen lays out the five-step sale roadmap, from getting data ready and valuing the firm before you ever meet a buyer, to why finding a buyer is really a screening problem, to the asset-versus-equity-sale choice that drives your taxes, leverage, and optionality. She also explains why a headline multiple hides what matters: how the price is actually paid in cash, note, and earnout, and how each is taxed.Nicole then covers the merger path, where two firms become one shared entity: matching partners on growth goals, dividing ownership from a valuation, structuring cash and equity to avoid a disguised sale, and protecting yourself with clear roles, voting classes, and exit terms. Owners weighing a clean exit against staying on to grow, sole proprietors who want a built-in successor, and anyone trying to keep both paths open will find this a practical guide to choosing deliberately. Host Kristen Grau, CPA, CVA, CEPA Executive Vice President Paper-plane Linkedin-in Host Nicole Frey, CFP® Director of Team Solutions Paper-plane Linkedin-in
Merger or Sale: The Right Path for Your Exit
Watch the Replay Should You Merge or Sell? The Right Exit Depends on Your Goals, Not Your Size. In this session, Succession Resource Group’s Kristen Grau, CPA, CVA, CEPA, and Nicole Frey, CFP®, walk advisory firm owners through one of the biggest decisions of their career: whether to sell the firm or merge it. Their throughline is that the right path depends on your objectives, not your firm size. Kristen lays out the five-step sale roadmap, from getting data ready and valuing the firm before you ever meet a buyer, to why finding a buyer is really a screening problem, to the asset-versus-equity-sale choice that drives your taxes, leverage, and optionality. She also explains why a headline multiple hides what matters: how the price is actually paid in cash, note, and earnout, and how each is taxed. Nicole then covers the merger path, where two firms become one shared entity: matching partners on growth goals, dividing ownership from a valuation, structuring cash and equity to avoid a disguised sale, and protecting yourself with clear roles, voting classes, and exit terms. Owners weighing a clean exit against staying on to grow, sole proprietors who want a built-in successor, and anyone trying to keep both paths open will find this a practical guide to choosing deliberately. Host Kristen Grau, CPA, CVA, CEPA Executive Vice President Paper-plane Linkedin-in Host Nicole Frey, CFP® Director of Team Solutions Paper-plane Linkedin-in Transcript Kristen Grau: Hello. We’re going to wait a few moments to let everyone jump on, and then we’ll get started. Looks like we have most of you today, so welcome to today’s session, “Merger or Sale: Finding the Right Path to Your Exit.” Over the next hour, Nicole and I will walk you through how to think clearly about one of the biggest decisions you’ll make as a firm owner: whether a merger or a sale is the right path to exit your business. Before we get into the framework, quick context on Succession Resource Group. SRG officially began in 2012, but some of us have been doing this for much longer. We’re a team of 23 full-time specialists with multiple credentials and an average project-lead tenure of over 12 years. This matters because you want confidence that the team you hire has been through this before. And because mergers and sales touch valuation, tax, legal structure, and people all at once, you don’t want four different consultants who don’t talk to each other. You want one team that already speaks all four languages. That’s Succession Resource Group. Just as important, what we actually do spans the full life cycle. We complete valuation work, including expert witness and divorce valuations, equity design and compensation planning, entity support, buy-side and sell-side deal structuring, succession planning, mergers, and deal support. If it touches ownership transitions, we’ve built a service line for it. We’ve also picked up outside recognition for our expertise from ThinkAdvisor, Wealth Management, and Inc. Best Places to Work. The people in this room don’t just talk about these things, we live them. A couple of quick introductions before we dive in. I’m Kristen Grau. I’m a certified public accountant, a certified valuation analyst, and a Certified Exit Planning Advisor. I serve as Executive Vice President here at Succession Resource Group, leading the sell-side transactions and making sure the advisors and firm owners we represent actually get heard and protected through a process that can otherwise move fast around them. Joining me today is my colleague, Nicole Frey. Nicole is a Certified Financial Planner and our Director of Team Solutions. She leads mergers and entity consulting work, and her background in law and financial services brings a depth of contracts, entity structure, and legal process that matters enormously when two firms actually decide to combine. Nicole will take you through the merger path later in this session, so you’ll hear directly from her shortly. For now, let’s clear the housekeeping. There is a Q&A box to ask any questions as we go. Nicole and I will be watching it, and we’ll get to as many as we can live. Anything we don’t cover, we’ll follow up with you directly after the session. You’ll also get today’s recording by email within 24 hours, so you can relax and actually listen. The deck will be available if you’d like a copy. Our team will contact you after the webinar to address any questions and help you determine your exit path. Lastly, don’t forget to register for our upcoming webinars, which we’ll share in the chat. To help us understand who’s in the room today, we’d love it if you could answer a few short polling questions that will show up on your screen in a moment. We’ll wait a couple of seconds for you to answer before I dive in. It helps us develop the content for you and better tailor today’s presentation. While you’re completing that poll, here’s how we’ll spend our time together. First, we want to help you understand what choosing the right exit path looks like, and the actual decision-making framework between a sale and a merger, not just a pros-and-cons list. Then we’ll walk you through what a sale path looks like in real depth, and help you tell whether a sale goes well or turns into a headache. After that, Nicole will take you through the merger path at the same level of depth. Then we’ll bring it all together and compare the two directly, including benefits and trade-offs, side by side, so you’re not just choosing which exit path is right, but seeing how to take it from an abstract concept into actual application. So let’s dive in. Before defaulting to a particular exit path without full information, we want you to actually understand the difference between the two. And before we do that, we need to be on the same page, because “merger” and “sale” get used loosely in our industry, and that causes real confusion. A