RIA owners: avoid running out of runway before sale

David Grau, CEO of Succession Resource Group, led a webinar last month advising registered investment adviser owners who plan to sell within 36 to 60 months to begin preparing immediately. He said the work needed to ready a firm for sale often takes longer than owners expect and can limit options if delayed.

Grau outlined specific areas sellers should address before marketing a firm. He recommended resolving contractual obligations such as office leases and agreements with broker-dealers and custodians, assembling several years of profit and expense records, building client relationships that transfer to new owners, creating recurring revenue streams, and developing a bench of second- or third-generation advisers to reduce key-person risk. He also advised reviewing the firm’s legal entity and ensuring data and client portability are documented and auditable.

Buyers increasingly look for revenue that is sustainable over multiple years rather than driven by a single recent event. Proving stability typically requires clear records, depth in personnel, and standardized business processes, Grau said.

Grau described the sales timeline as multi-stage. The process begins with gathering and cleaning financial and operational data, then marketing the firm and negotiating terms. After an offer is accepted, due diligence, contract work and financing can take about four to six months, and the post-sale transition can require six to 18 months.

“Can you do this all in six months? Sure. Are you going to have to make compromises? Most certainly,” Grau said, urging owners to allow more runway when possible. He also emphasized prioritizing cultural and strategic fit with a buyer. “If you put ‘fit’ first, everything else gets a lot easier,” he added.

Grau described how enterprise value narrows the pool of potential buyers. Firms valued under $2 million typically draw interest from peers or internal successors; those between $2 million and $10 million may attract private equity-backed aggregators; practices above $10 million could be considered for direct private equity investment. He noted private equity buyers generally seek large, non-owner-operated platforms and may not offer competitive structures to smaller firms.

Grau said many former owners tell his team they wished they had managed valuation annually, prepared for buyer due diligence sooner, solicited multiple bids instead of taking the first offer, and confirmed a satisfactory long-term home for the firm after a sale. He warned that more than 100,000 financial advisers are expected to retire in coming years and that some unprepared practices may struggle to find buyers or achieve prior valuation levels.