JERSEY CITY, N.J., Aug. 1 NJ-BONY-PershingStudy
JERSEY CITY, N.J., Aug. 1 /PRNewswire-FirstCall/ -- Pershing Advisor
Solutions LLC, a subsidiary of The Bank of New York Mellon Corporation,
released a new independent study today with Moss Adams LLP entitled Real Deals
2008: Definitive Information on Mergers and Acquisitions for Advisors.
The study reviews the mergers and acquisitions market in the independent
registered investment advisory (RIA) industry over the past decade and
benchmarks key changes in the marketplace since Pershing Advisor Solutions'
previous study with Moss Adams entitled Real Deals: Definitive Information on
Mergers and Acquisitions for Advisors, published in 2006. The report provides
a framework for advisory firm owners to evaluate various transaction options,
including guidelines that review the advantages and disadvantages of each deal
type. According to the study, the average number of annual deals rose 37% in
the last two years and the increase in acquisitions shows long-term signs of
sustainability. Highlights from the study include:
-- Let's Make A Deal: RIAs are looking for a deal. At least once within
the last two years 53% of RIAs either bought or considered buying another
advisory firm. RIAs who want to buy are predominantly looking to access new
markets or for an acceleration of growth by improving leverage or capacity.
According to the study, the most important drivers for a firm sale or merger
are as follows: 37% of advisors are seeking a succession solution, 25% are
aiming to achieve synergies with an acquirer, 17% are looking to cash out
their equity value, 9% are motivated by financial rewards, 5% view the
transaction to be in their clients' best interest and 7% courted a sale or
merger for other reasons than those listed;
-- Supply Meets Demand: Advisors in 2008 have many more options for
creating liquidity or raising capital than they did two years ago, as recorded
in Real Deals 2006. While ad hoc bank purchases represented the predominant
deal type during the first half of the current decade, serial buyers have
emerged over the last two years as the leading investor type. Serial buyers,
whose strategies center on making multiple advisory firm deals, accounted for
more than one-third of transactions during the 2006-2007 period;
-- The Changing Buyer Landscape: Real Deals 2006 data illustrated that
most deals were situational and, in general, motivation was primarily
synergistic. Today, synergistic deals are overshadowed by purely financial
buyers who tend to be passive, or financially motivated serial buyers who seek
to add value with existing capabilities, such as by integrating complimentary
services or leveraging general scale efficiencies. These buyers are more
interested in near-term financial gain than in deals that complement their
strategies. Consistent with their financial orientation, they have added
greater complexity to deal terms, shifting more risk to sellers and making
actual value difficult to gauge;
-- Transaction Activity is Intensifying: Mergers and acquisitions are
building stronger firms, creating synergies, enabling efficiencies and
providing training and development opportunities for a new generation of
advisory firm leaders. Real Deals 2006 highlighted an active and growing
seller's market for advisory firms. Since this time, a record number of deals
have been made, driven by both the supply side and the demand side. The
annual number of transactions involving investment advisory firms averaged 35
during the 2000-2005 period examined in Real Deals 2006. The average number of
annual deals in the two years since that study has jumped 37%, to 48 and
despite a slowing of transaction activity in early 2008, the long-term trend
of an increasing number of deals remains strong;
-- Understanding the Implications: Transaction trends are promising to
reshape the industry. The implications of this new environment will affect
most firms -- regardless of their current interest in such transactions. They
will face growing pressure to enter into deals in light of rising valuations,
consolidation and staff development needs. Understanding the long-term
implications of the various deal structures and buyer options is critical for
advisory firm owners; and
-- Being Prepared: Whether a deal is in their immediate future, advisory
firm owners must continually invest in their firms, build transferable value
and position their firms as if a transaction were immediately pending. When
the time is right to pursue a transaction, it must be done deliberately and
with clear purpose. The best-prepared firms are organized as businesses built
to last and possess solid management, an orientation toward growth, depth of
talent and sustained profitability.
Mark Tibergien, chief executive officer of Pershing Advisor Solutions,
said, "While this mergers and acquisitions environment is encouraging for
continued industry prosperity, it poses challenges for firm owners in their
attempts to understand and take advantage of the opportunities that arise.
The terms of the most successful transactions in any given situation are
shaped by the characteristics of the individual firm and by the business and
personal preferences of its owners."
Dan Inveen, senior research manager at Moss Adams LLP, said, "Never before
has the independent registered investment advisory marketplace experienced
such a high volume of transactions and had so many options for structuring
deals. The transaction environment we are experiencing is characterized by a
rapidly rising level of market liquidity. As a result, firms can now grow and
develop in ways that were previously unimaginable."
Real Deals 2008 is a component of Pershing's Ideas Without Limits(TM)
thought-leadership program and was commissioned by Pershing Advisor Solutions
LLC and independently executed by Moss Adams LLP. Transaction data and expert
interviews form the foundation of this report. A variety of sources,
including survey data, trade publications and regulatory filings also
contributed to the development of the transactions database.
Pershing Advisor Solutions LLC (member FINRA/SIPC) is an affiliate of
Pershing LLC and a leading provider of financial business solutions to
independent, fee-based registered investment advisors and dually-registered
advisors working in conjunction with many of Pershing LLC's introducing
broker-dealer customers. Pershing LLC (member FINRA/NYSE/SIPC), a subsidiary
of The Bank of New York Mellon Corporation, is committed to delivering
dependable operational support, robust trading services, flexible technology,
an expansive array of investment solutions, practice management support and
service excellence. Through an innovative custody platform, Pershing Advisor
Solutions delivers superior expertise and scalable and customizable solutions
to help its customers manage and grow their fee-based businesses. Additional
information is available at www.pershingadvisorsolutions.com.
The Bank of New York Mellon Corporation is a global financial services
company focused on helping clients manage and service their financial assets,
operating in 34 countries and serving more than 100 markets. The company is a
leading provider of financial services for institutions, corporations, and
high-net-worth individuals, providing superior asset management and wealth
management, asset servicing, issuer services, clearing services, and treasury
services through a worldwide client-focused team. It has more than $23
trillion in assets under custody and administration, more than $1.1 trillion
in assets under management, and services $12 trillion in outstanding debt.
Additional information is available at www.bnymellon.com.
SOURCE The Bank of New York Mellon Corporation
