DIMENSIONAL FUND ADVISORS RELEASES DATA FROM THE M&A SECTION OF ITS 2020 GLOBAL ADVISOR STUDY, ONE OF THE LARGEST GLOBAL ADVISOR BUSINESS ANALYSES.
Dimensional’s 2020 Global Advisor Study indicated financial advisors have strong interests in pursuing mergers and acquisitions, yet need to focus efforts to develop their strategies around M&A, succession, and post-transaction integration.
The 2020 study aggregated data from nearly 1,000 independent advisory firms globally with $368 billion in combined assets under management (AUM). 57 UK firms participated in the M&A segment of the study, ranging from newly established practices to ensembles with an average AUM of £1.4bn.
Key UK insights from the study include:
- Nearly half of the surveyed firms indicated they would like to execute a merger or acquisition over the next 24 months, with most of those firms indicating interest in acquiring. However, the study also found that over 81% of firms lack a defined M&A strategy.
- Among the firms that are actively considering M&A, the top four responses indicated that 21% want to be acquired, 19% want to acquire a firm, 9% want to acquire a team, and 11% want to merge.
- 65% of respondents have been contacted by firms interested in M&A, but only 3% of this subset moved forward with a deal.
- 57% of the reported transactions occurred among firms with less than £50MM in AUM, which reflects the ongoing focus on partnering with larger, more mature firms to pursue continued growth and succession planning.
- 18% of firms have a succession strategy in place, indicating that many firms are still grappling with developing a comprehensive plan.
- Among all EMEA survey participants, client retention for completed transactions in the last three years was 95%, on average.
The study also indicated advisors’ ongoing focus on finding an internal succession solution. According to the study, the biggest challenges that firms face when implementing a succession plan are identifying a successor (61%) followed by understanding the different succession options (35%). With talent acquisition among the top-five reasons for buying another advisory business, some firms are turning to an acquisition strategy to find potential next-generation talent who may provide a succession solution.
The study highlighted the large number of advisors who are approaching retirement soon and need to consider their succession options. Of the firms that have a documented succession plan, 90% are looking to execute their plans within the next 10 years.
Head of Dimensional’s UK & Ireland Adviser Group, David Jones, said: “We have worked very closely with advisers for many years. The biggest challenge for some is now to ensure that the care and attention they give to their clients is maintained after they step back from the business.
“Finding the right fit in a new owner or partner can take years, and needs to be approached with the same dedication as building a business in the first place. Business owners need to be clear on their priorities and goals and have a list of deal-breakers that are shared up front. But if the right deal is done, their clients will enjoy uninterrupted continuity in their investment and client experience.”
