The mergers and acquisitions market for registered investment advisors continues to be red hot, with deal volume breaking new records quarter to quarter. As the RIA industry matures, so does the M&A advisory space. Deal structures are becoming more complex and new buyers with deep pockets continue to enter the market.
Jacqueline Martinez has had a first-row seat to all of it. Her career started at Joe Duran’s United Capital, where she co-led the M&A team with Matt Brinker, former chief business development officer, and Allen Darby, who found new partnership opportunities for the firm with a strong focus on cultural fit, Martinez said, which was crucially important for the firm’s success. At United Capital, she closed and integrated nearly 35 transactions of independent RIAs with $200 million to $2 billion in assets in the five years leading up to the firm’s $750 million sale to Goldman Sachs.
After United Capital was sold, Martinez felt there were a lot of things that weren’t working about the industry’s M&A advisory process. While most RIAs are looking for a good cultural fit, the typical sell-side advisor still uses the financial auction to match buyers and sellers.
“This math-led screening process seems entirely improper to me when both parties cite culture as the most important thing they want to get right,” Darby said. “That process does not address culture at all.”
In 2019, Darby created sell-side Alaris Acquisitions to bring the model he used at United Capital to the broader RIA M&A arena. Martinez jumped on board in 2021.
For the last four years, they’ve been cataloging some of the biggest buyers in the industry, from Edelman Financial Engines and Prime Capital Investment Advisors to regional buyers like Modern Wealth. They now boast 75 buyers on their roster, with whom they’ve spent at least 30 hours each, often in their offices conducting qualitative interviews with their leadership teams. They’ve collected about 150 different data points on each buyer and compiled all of this into an application that they hope will become the ‘Google’ of M&A in wealth management.
“Ninety-five percent of the deals that we work on, the founders are not looking to exit,” Martinez said. “They’re looking to change the way that they work. They’re looking to have more resources for their teams, their clients and just have a new chapter of growth. For those reasons, I think focusing on the price throughout the sell-side process doesn’t yield that result. But rather, by focusing on all of the qualitative elements and cultural fit, if you will, that really is the better way to do it.”
Alaris defines the best deals as a combination of cultural fit, the highest offer and post-acquisition quality of life. Rather than running a blind auction process, Alaris will run a “cultural competition,” using objective and measurable screens against all the data points they’ve captured on the buyers and sellers.
The firm will close on its 46th deal in the next couple of weeks and expects to reach 50 by the end of the first quarter of 2025.
