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It turns out that succession planning doesn’t benefit only clients and employees. It’s good for valuations, too.
Financial advisory mergers and acquisitions reached a torrid pace in 2025, with top registered investment advisory firms fetching record valuations. There were 276 RIA deals last year, garnering a median valuation of 11.6 times earnings before interest, taxes, depreciation and amortization, according to the 2026 RIA Deal Room Report. Similarly, an April report from DeVoe recorded 93 announced transactions in the first quarter of 2026, tying the third quarter of last year as the most active ever and the strongest start to a year in RIA deal history. David DeVoe, CEO of investment banking and consulting firm DeVoe & Co., told Advisor Upside that despite this year’s macroeconomic uncertainty, dealmaking continued, with transactions in the second quarter rising another 18% through early June.
The strong market may entice independent advisors to put up a for-sale sign, and they are probably fielding phone calls from interested buyers. Don’t be blinded by dollar signs, though, as not every firm garners the big bucks.
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Got Talent?
Heading most buyers’ wish lists are firms with solid management teams and strong organic growth, net of markets. Brandon Kawal, partner at Advisor Growth Strategies and lead author of the RIA Deal Room Report, said buyers want merger partners who have a go-to-market strategy to win new clients. “The difference between average and premium (valuation) is really how much they believe that particular seller will immediately help them accomplish that goal … to perpetuate their organic growth story,” he said. Critical to the growth goal are firms with two or three generations of potential leaders in place.
In the past two years, DeVoe said, 89% of deals were backed by private equity with aggressive growth goals. Private equity firms are also coming with the deepest pockets.“They prefer to buy growing organizations that can contribute to an accelerating growth rate, as opposed to finding someone that they need to train to help grow,” he said. Incentives such as equity are almost mandatory to keep next-gen top talent. Corey Kupfer, founder of law firm Kupfer PLLC, said he’s watched top young talent who have had no stakes in the business leave during the sale process. In addition to having succession leaders in place, buyers also want firms with a unique niche, such as interesting digital marketing, or expertise in specialties such as working with business owners or clients navigating divorces. Offering clients a great experience rounds out the trifecta of qualities most attractive to buyers, Kawal said.
The age of client relationships also matters. Older advisors with elderly clients may not get as high a multiple for their business for two reasons. Many buyers expect sellers to stick around and work for a few years rather than retire outright, and much older clients are usually spending their wealth rather than accumulating assets, Kupfer said.
Buyers also examine key performance indicators like compensation structures to see how they compare with their own pay scales and to get a sense of employee incentives. Kawal said buyers look at how RIAs build portfolios and invest, not only to judge performance but also to gauge whether the strategies are transferable to the new firm. That matters for scale as well as for keeping clients happy. “If your current investing philosophy is way out in left field, or you’re doing a lot of exotic things, there could be a lot of change … and buyers know that clients don’t always love that type of change,” he said.
While economic and geopolitical uncertainty have increased in 2026, they haven’t shaken confidence in the M&A market so far. Buyers may become hesitant if there are multiple quarters of instability, but that increases the urgency for sellers to put themselves in the premium category. “The first deals (buyers are) going to probably shun in an unstable environment are the ones that are kind of average to below average,” Kawal said.
RIA as MVP
In a perfect world, potential sellers start to look at their business differently about two years before a potential transaction, DeVoe said. Start with investing in organic growth, net of markets. A successful marketing and business development strategy and structure can have the biggest impact:
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For every sustainable 1% increase in a firm’s growth rate, it will see about a 7% increase in valuation.
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Profitability also factors into the equation. For every 1% of incremental profit margin, firm valuations rise about 2.3%, DeVoe said.
However, he warns sellers to resist the urge to book a lot of expenses the year before selling. “Buyers are going to see through that,” he said. “They’ll not only make adjustments, but they’ll probably also raise an eyebrow on a behavior pattern that they’re seeing in a potential future partner.”
Spring Cleaning. Advisors should tidy up their systems and operations, too. Buyers will conduct due diligence and look for potential risks and holes, Kupfer said. Sellers should work with their compliance teams, accountants and attorneys to ensure all vendors have up-to-date agreements, look at sub-advisor relationships and review other operations. Sellers who include potentially questionable discretionary expenses should eliminate those a year or two before selling, even if it increases firm profits, Kupfer said. “It presents cleaner financials for a buyer, and you don’t have to argue over what’s a discretionary or a personal expense versus a true expense,” he said.
Since most deals include the seller staying on board for a certain time after closing, he urges sellers to scrutinize the employment agreement and the tie between their right to stay employed, the buyer’s right to terminate them and how employment affects the final purchase price. “Negotiate for protections, at least during the period of time that you can get your full purchase price, if not some of the earnout,” Kupfer said.
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