RIA Valuation Insights

A weekly update on issues important to the Investment Management industry

Current Events Transactions

Did Macquarie Pay 11x EBITDA for Waddell & Reed? Yes and No

Catching a Falling (Butter) Knife

Last week, Macquarie Group announced its acquisition of Waddell & Reed (WDR) for $1.7 billion. At first glance, the pricetag implies an EBITDA multiple of over 11x and some are asking why Macquarie’s new CEO paid such a premium for a business whose AUM has halved over the last six years. Unfortunately, it’s not that simple. In this post, we dig into the deal economics and explain why paying a premium does not necessarily mean Macquarie over paid.


The Role of Earn-Outs in RIA Transactions (Part Three)

In last week’s blog post, we covered five considerations for designing earn-outs. While there is no one set of rules for structuring an earn-out, keeping those conceptual issues in mind can help anchor the negotiation.  This week, we look at an example RIA transaction to illustrate how the considerations come into play when buyers and sellers are working out deal pricing and structure. 


Avoiding Buyer’s Remorse

The Role of Earn-Outs in RIA Transactions (Part Two)

Like old sports cars, acquisitions don’t come with warranties, so protecting yourself against buyer’s remorse is critical. Even with escrows and punitive terms, you can’t guarantee that you’ll get what you pay for in an acquisition; but, with a properly structured earn-out, you can at least pay for what you get.

Margins and Compensation

RIA Margins – How Does Your Firm’s Margin Affect Its Value?

An RIA’s margin is a simple, easily observable figure that encompasses a range of underlying considerations about a firm that are more difficult to measure, resulting in a convenient shorthand for how well the firm is doing.  Does a firm have the right people in the right roles?  Is the firm charging enough for the services it is providing?  Does the firm have enough–but not too much—overhead for its size?  The answers to all of these questions (and more) are condensed into the firm’s margin.

Alternative Assets Asset Management

2020 Alternative Asset Manager Update

Are Sustainable Investments the Future of Investment Management?

The market for sustainable investments has grown to over $12 trillion in the U.S. and the movement of investable assets into sustainable strategies is expected to accelerate. In this week’s post, we link to the newly published 2020 Alternative Asset Manager Update authored by Taryn Burgess, CFA, ABV. The update reviews the growth of sustainable investing over the last decade and considers the valuation implications for your RIA.

Current Events

2020: Too Good To Be True?

Despite Harrowing Moments, the RIA Community Is Prospering

Now, after seven months of living with the pandemic, there is still no end in sight.  We might only be halfway!  But despite the barrage of challenges, the RIA community has embraced WFH, profited from buoyant markets, and resumed a relentless pace of M&A.  It has been, if very strangely, a very good year. Is this a sign of industry resilience?  Or an awful lot of luck? 

COVID-19 Coverage Transactions Wealth Management

Low Rates and NIM Margins Spur Bank Interest in the Wealth Management Sector

Executives Seek Revenue Streams That Aren’t Tied to Interest Rate Movements

COVID-19 adversely affected sector M&A for a couple of months when most of the U.S. was under shelter at home/safer in place orders. However, deal activity is recovering quickly and now could be further accelerated as banks look to replace lost interest income with fee-based revenue. An increasing number of clients on the banking side of our practice are showing interest in the wealth management space, and it’s easy to understand why. Long-term rates hovering at historic lows have significantly impaired net interest margins, so banks are exploring other income sources to fill the void. Wealth management is a natural place to start since so many banks already offer financial advisory services of one form or another.

COVID-19 Coverage Industry Trends

Continuation of Market Rebound Drives Most Categories of Publicly Traded RIAs Higher in Q3

RIA Market Update

Share prices for publicly traded asset and wealth managers have trended upward during the second and third quarters after collapsing in mid-March with the broader market.  Alt asset managers have fared well over the last year as volatility and depressed asset prices have created an opportunity to deploy dry power and raise new funds in certain asset classes.  Traditional asset and wealth managers have generally moved in line with the broader equity market, while leveraged RIA aggregators have seen more volatility, both up and down, as the market bottomed in March before trending upward.

Investment Management

Mercer Capital provides RIAs, trust companies, and investment consultants with corporate valuation, litigation support, transaction advisory, and related services