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.
The value of an advisory practice depends heavily on who is buying it and how the deal is structured. Internal successors, peer firms, and private equity or aggregator buyers each project different cash flows and pay on different terms, so the same practice can support very different prices without anyone getting the math wrong.
This article explains why the value of a practice can differ, sometimes materially, depending on the buyer assumed and the structure of the transaction. A value calculated under the Income Approach, based on a firm's forward distributable cash flow as currently structured, will frequently differ from pricing observed in market transactions for comparable practices. Here is why.
Why Does the Same Practice Get Valued Differently?
Differing views of value are rarely due to disagreements over valuation methodology, understanding of current market conditions, or multiples. Divergent views on value and valuation typically stem from the assumed buyer. Different buyers, not individuals, but different buyer archetypes (internal successors, external peers, aggregators and private equity), have different cash flows, use different terms, and have different levels of control and different abilities to influence outcomes.
Two terms come up throughout this article. The Income Approach values a business based on the present value of the cash flow it is expected to produce. A market approach values it based on what buyers have paid for comparable practices. Market multiples already reflect the synergies buyers bring to a deal, which is one reason the two approaches can land in different places. As Ryan Grau explained on SRG's April 2026 webinar on mergers:
"A market approach inherently in the data is going to have synergies built into those market multiples."
Ryan Grau, CVA, CBA
The sections below walk through how each buyer archetype builds its view of value. For a broader look at what drives your number, see How RIA Valuations Work.
How Do Internal Successors Value a Practice?
Internal succession typically values the firm assuming it continues to operate largely as it does today. While valuation is forward-looking, the forecast is anchored to the firm's demonstrated performance, current staffing model, compensation structure, and service offering.
This cash flow framework can be summarized as:
The internal buyer is focused on the present value of future available cash flow under the current business model. The forecast incorporates expected organic growth, client retention, and operational efficiencies achievable within the firm's existing scale and infrastructure, without assuming transformative changes in capital access, service breadth, or integration into a larger enterprise.
The internal value therefore lacks any potential synergistic effects seen with outside buyers when the firm is consolidated. In the hierarchy of transaction outcomes, internal succession will typically produce the lowest value, driven purely by economics. For many owners, that trade-off is worth it for continuity and control, and a well-designed succession plan can close part of the gap. For more on this path, read Executing a Successful Internal Succession Plan in the Private Equity Era.
Why Do Peer Buyers Usually Pay More Than Internal Successors?
In a transaction between independent advisory firms, the buyer typically acquires control and integrates the seller's business, or the relevant parts of it, into its operating platform. The buyer underwrites not only the seller's standalone cash flow, but also the incremental cash flow created by combining two operating businesses, eliminating redundant costs, and scaling fixed infrastructure across a larger revenue base.
A simplified framework may be expressed as:
The key driver is operational integration synergy. By consolidating overlapping infrastructure, the buyer can eliminate duplicative costs, including technology, back office and administration, compliance, and certain owner functions that can be replaced with lower-cost salaried roles, and spread fixed expenses across a larger revenue base.
Because these savings are typically identifiable before closing and largely within the buyer's control to execute, peer transactions often support higher pricing than internal transitions, where value is based primarily on standalone distributable cash flow.
How Do Private Equity Firms and Aggregators Value a Practice?
Private equity and aggregator buyers often underwrite a different cash flow profile. Similar to peer transactions, they may realize integration efficiencies through consolidation. In addition, platforms frequently assume incremental revenue capacity tied to scale, brand, capital support, and expanded service breadth. These models often also assume the founder remains employed and continues to be compensated post-transaction.
A simplified framework may be expressed as:
This type of transaction not only integrates the seller's firm but also positions it within a larger enterprise offering expanded investment options, family office services, tax capabilities, estate planning, comprehensive financial planning, insurance products, marketing engines, and capital support.
These expanded assumptions depend not only on the platform's capabilities, but also on the continued involvement of the selling principals and the achievement of specified performance metrics. Pricing in these transactions exceeds internal or peer sale values because the buyer underwrites platform-enabled revenue expansion and shares future risk with the seller.
Why Can a Higher Headline Multiple Be Misleading?
In a sale to a private equity or aggregator buyer, the seller may be monetizing both current earnings and a portion of assumed platform-enabled upside. A significant part of the difference in observed headline value is often driven by deal structure.
Unlike many peer transactions, where most consideration is paid in cash at closing and the remainder within a few years, these transactions commonly pay less than 50% of total consideration in cash at closing. The balance is frequently delivered through retention-based payments, earnouts tied to growth thresholds, and equity in the acquiring platform, often called rolled equity or an equity rollover.
SRG's recent deal data shows the pattern clearly. David Grau Jr. described the typical private equity structure on SRG's July 2026 webinar on getting "PE value":
"You want private equity deals, you're looking at the 40-30-30, where it's 40% cash down. 30% rolled equity, equity in the buyer's firm, and 30% usually on an earnout."
David Grau Jr., JD, Founder and CEO, Succession Resource Group
An equity rollover represents a reinvestment into the parent enterprise, the ultimate value of which depends on future platform performance and exit outcomes. A meaningful portion of the stated price or multiple may therefore reflect exposure to future execution risk rather than guaranteed cash consideration at closing. Sellers who retain equity are also economically aligned with the platform's continued growth and value creation.
"What can appear to be a higher multiple may, in substance, represent participation in future platform performance rather than payment solely for existing standalone cash flow."
Ryan Grau, CVA, CBA
For a deeper look at negotiating these terms, see How to Get "PE Value" With or Without PE.
How Do the Three Buyer Types Compare?
Transaction pricing varies because buyers apply different cash flow assumptions and allocate risk differently through deal terms:
Each transaction outcome can be rational within its own framework. Differences in value across buyer archetypes are driven by differences in projected cash flow (standalone versus synergy-adjusted or platform-adjusted) and by how much risk the seller retains through payment terms. Without considering the underlying cash flow assumptions, control rights, and deal structure, comparisons across transaction types can be misleading.
What Should You Do Before Comparing Offers?
Knowing which buyer your number assumes is the first step to making a good decision. A few practical moves help:
- Know the buyer behind the number. Ask whether a valuation reflects standalone cash flow or a synergy-adjusted market view. An independent valuation should tell you which, and why.
- Separate guaranteed dollars from contingent ones. Line up cash at closing, notes, earnouts, retention payments, and rolled equity side by side before comparing headline multiples.
- Stress-test the upside. Rolled equity and earnouts pay off only if the platform and your book perform. Ask what happens to your payout if growth targets are missed.
- Match the path to your goals. Continuity and control point toward internal succession. Maximum guaranteed value often points toward a peer sale. Potential upside and a longer runway point toward private equity or an aggregator. Our article on choosing between a merger and a sale goes deeper on this decision.
SRG's Seller Advocacy team runs competitive processes across buyer types so you can compare offers on equal terms, and our Deal Support team helps structure a deal when you already know your buyer.
Frequently Asked Questions
Why can the same advisory practice have different valuations?
Because different buyer archetypes project different cash flows and pay on different terms. Internal successors value the firm as it runs today, peer buyers add integration synergies, and private equity or aggregator buyers add platform-driven growth. The methodology can be sound in every case and still produce different numbers.
What is forward distributable cash flow?
It is projected revenue minus operating expenses and market-based owner compensation, which gives projected normalized EBITDA, minus the reinvestment the business requires. It is the cash an owner can expect the firm to produce under its current business model.
Why does internal succession usually produce the lowest value?
An internal buyer values the firm as it operates today, without the cost savings or revenue expansion an outside buyer can bring through consolidation. Without those synergies, internal succession typically produces the lowest value, driven purely by economics.
Why do peer buyers often pay more than internal successors?
Peer buyers can eliminate duplicative costs such as technology, back office, and compliance, and spread fixed expenses across a larger revenue base. Because those savings are identifiable before closing and within the buyer's control, peer transactions often support higher pricing.
How much of a private equity deal is paid in cash at closing?
These transactions commonly pay less than 50% of total consideration in cash at closing. A typical structure SRG sees is about 40% cash, 30% rolled equity in the buyer's firm, and 30% on an earnout tied to growth targets.
What is an equity rollover?
An equity rollover is the portion of the purchase price paid as equity in the acquiring platform instead of cash. Its final value depends on the platform's future performance and eventual exit, so part of the headline price reflects future execution risk.
Is a higher multiple always the better offer?
Not necessarily. A higher headline multiple may include earnouts, retention payments, and rolled equity that depend on future results. Compare the guaranteed cash, the contingent payments, and the risk you keep before deciding which offer is stronger.
