Technology: the M&A Influencer


Thursday, April 11, 2019 | By Steve Leivent

Technology: the M&A Influencer

Mergers and acquisitions (M&A) in the wealth management space is a trend that’s not going away. In fact, I expect it to increase at a rapid pace of the next five years. For RIAs, the desire to gain scale and owner succession planning continue to be major drivers. With the average owner of an RIA nearing retirement age and about 70% of advisors who don’t have written succession plans, it’s no wonder that selling seems to be an attractive option. Conversely, acquiring firms see compelling economies of scale to be gained by absorbing assets into their existing infrastructure, along with the chance to bring experienced advisors on board in the face of a shrinking talent pool.

Through the lens of the Black Diamond Wealth Platform, I see technology as an impactful asset no matter what side of the M&A spectrum you sit. In addition, technology positively impacts both the scale and succession M&A drivers and ultimately boosts a firm’s overall business valuation.

With such focus on this trend, we decided to take a closer look – especially as it pertains to the technology influence. In our whitepaper, Merger and Acquisition Activity for Investment Advisors, we take a deep look at how technology plays into M&A success by addressing both scale and succession planning.

Among our research, we found infrastructure as a major theme. “It takes way more than a check. It’s an infrastructure story today,” says Matt Sonnen, CEO of PFI Advisors. Things like workflow automation, document management, client communications, electronic signatures, and compliance tools were all revealed as top technologies advisors desire during a merger or acquisition. 

But our curiosity didn’t stop there. We continued our M&A research with the whitepaper, The Technology Impact on Business Valuation, which illustrates how an investment in a state-of-the-art technology platform can pay itself back many times over in the form of higher firm value.

“Technology has a dual benefit, not only cutting costs but also helping drive revenue growth,” says Dan Seivert, CEO of Echelon Partners.

Our findings in this study concluded that a modern technology platform that leverages automation and integration to streamline workflows, drive efficiency and reduce operational risk can have a positive effect on a firm’s valuation – particularly if it is supported by a provider with a track record of innovation. Data integrity and well-documented processes also ease the transfer of a firm’s business to new owners and the onboarding of new users.

With the rise in M&A activity and the motivating drivers from both the buying and selling perspectives, technology continues to be a theme that influences decisions, ease consolidation and boosts a firm’s overall value.



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