Quality of Earnings, Investment Management

June 14, 2024

WHITEPAPER | Assessing Earnings Quality in the Investment Management Industry

Earnings are a crucial reference point in determining transaction prices negotiated by buyers and sellers of RIA firms. However, reported earnings, even when audited and presented in accordance with Generally Accepted Accounting Principles (GAAP), have limitations. GAAP earnings are backward-looking, reflecting how a business has performed under specific rules in the past. While these historical earnings have their uses, buyers in the RIA industry focus more on the future—what’s visible through the windshield, not the rearview mirror.

In this whitepaper, we illustrate how buyers and sellers benefit from a quality of earnings report that extracts a company’s sustainable earning power from the thicket of historical GAAP earnings. We review the most common earnings adjustments applied in QofE analyses and review the role of working capital and capital expenditures as the links between EBITDA and cash flow available to buyers.

Download
Download Whitepaper

Continue Reading

Five Takeaways from Dimensional Fund Advisors’ Deals and Succession Conference
Five Takeaways from Dimensional Fund Advisors’ Deals and Succession Conference
Our team attended Dimensional’s Deals and Succession Conference in Charlotte this week, where industry leaders gathered to discuss the evolving M&A and succession landscape. While activity remains strong, this year’s conversations centered more on growth quality, equity structure, leadership depth, and cultural alignment than on deal volume alone.
Are IPOs in the Future for Wealth Management?
Are IPOs in the Future for Wealth Management?

Private Enthusiasm, Public Skepticism

There is a quiet irony developing in wealth management. Private equity firms continue to pay premium, sometimes nosebleed, prices for large RIA platforms. Acquisition funding continues to be available and consolidators keep consolidating. Even as private market exits have slowed and fundraising has become more difficult, sponsors remain willing to commit fresh capital to the sector. At the same time, public markets have shown only modest enthusiasm for investment management businesses.
The Silent Risk in Many RIA Succession Plans
The Silent Risk in Many RIA Succession Plans
In this article we discuss four of the most common “silent risks” embedded in otherwise well-intentioned succession plans.

Cart

Your cart is empty