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Harnessing the Power of Mergers


Mergers are transactions that can take on many shapes, apply to almost any size advisory enterprise, and are infinitely customizable depending on the unique details and situations of the participating advisors.  

Advisors commonly think of a merger as the statutory combination of two practices into one in a tax efficient manner, but it’s better to think of the merger process as the combination of two or more advisors’ strengths, client bases, and cash flow streams, while reducing or eliminating weaknesses and inefficiencies – lofty goals to be sure, but readily achievable.

The reality is that mergers can be used to address a much wider set of challenges and opportunities including:

  1. Growth through acquisition (i.e., by merging a small practice into a larger practice, and then setting up an internal succession/continuity plan);
  2. Finding a successor, or becoming a successor (by first creating an internal, minority equity partner who later completes the buy-out of the founder’s S-corporation or LLC);
  3. Establishing a practical and reliable Continuity Plan and protecting the value of your practice against your sudden death, disability or retirement is best accomplished by having an equity partner such as may be created through a merger;
  4. Improving Enterprise or Revenue Strength through increased efficiencies and the added strengths of other advisory owners;
  5. Expanding market territory, expertise, and services;
  6. Building a strong, enduring business by combining the diverse strengths of multiple contributors.

To help illustrate these benefits, consider the following three examples as discussed in our recent Roundtable Talk, “Every Merger Is Unique,” below, each representing an actual merger between independent advisors that we helped orchestrate in 2018: 


Two practice owners, aligned with the same broker-dealer, and who are of similar age, decide to explore a merger in order to create a single, strong business. Each practice owner, organized as a single-owner S-corporation, has two younger advisors on staff as well as support staff. Each owner leases office space in the same city, about ten miles apart from one another.

A common reason for considering a merger is to take advantage of the strengths of the other owner and to create efficiencies in terms of staffing, office space, and marketing opportunities. One owner may be exceptionally good at finding new clients and establishing strong relationships (the “rainmaking aspect”), while the other owner and his/her team are stronger at business operations, managing staff, minimizing overhead, and executing a business plan. Merging two offices into one, focusing on each other’s strengths, and eliminating redundant costs can mean stronger growth and a better level of profitability. A merger also creates an excellent opportunity to blend in next generation talent as minority owners and to launch a formal succession plan.




Three advisors of varying age, each operating as a sole proprietorship generating less than $225,000/year in gross revenue, decide to contribute their client relationships, cash flows and assets into one, newly organized and branded Limited Liability Company, receiving equity and compensation as a result. As this new group aligns their interests, goals and strengths, they find many efficiencies in establishing a single office structure, one payroll, one marketing plan (now covering 5 different states with a wider set of skills and greater combined expertise to offer new and current clients), one office manager, etc. In addition, the younger advisors can set up an internal continuity and succession plan for the older advisor of the group, solving problems that were impossible as individual advisors.

The process of merging one or more books, practices or businesses together can solve problems much faster and more thoroughly than hiring talent and trying to develop it internally. The merger process involves equity, meaning that participants don’t just think like owners, they are owners and they’re fully invested in the outcome. Mergers aren’t for everyone; just those who want to build something twice as strong in a fraction of the time.


Two practices, each with two owners/shareholders, decide to merge to solve some difficult problems and to create an enterprise that can continue with at least three of the owners going forward. In one practice, the owners are of similar age, are equal owners, and have built substantial value in their fee-only model. One advisor wants to work for another 3 or 4 years, and then retire and cash out. The other advisor does not want to buy-out the older advisor and enter into a payment arrangement that may last 7 to 10 years as he will be in his early 60’s by that time, but does want to work three days a week, or so, for an unspecified period of time. The other practice has two younger owners, both in their 40’s, a fee-based operation strongly considering a fee-only RIA of their own; growth by acquisition is also one of their goals.

A merger in this instance can almost instantly create opportunities and solutions. By merging the smaller second practice into the larger fee-only model, the younger owners step into an established RIA business, an industry-specific entity structure with an ADV in place and several hundred Investment Advisory Agreements and clients. The four owners, as part of the merger, will execute a Buy-Sell Agreement that lays out short-term and long-term succession plans. The younger owners, by merging their smaller practice into the larger practice, become equity partners and accept both the opportunities and obligations of ownership. The clients of the larger practice suddenly have four advisors to work with in the near term, and a continuing team for decades to come. 

Take a more detailed look at these three mergers as well as gain some further expert insight into the merger process by viewing our Roundtable Talk, “Every Merger is Unique” with experts Rod Boutin, JD, and Ericka Langone, JD. You can watch the full discussion here.

FP Transitions has developed a unique approach to helping advisors explore a merger opportunity as part of their enterprise growth solutions. Merger development is part of our Enterprise Consulting suite which helps unique businesses like yours focus building efforts and create a sustainable and valuable business.

To learn more, please read our white paper, Mergers: A Focus on the “M” in M&A.

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