An M&A deal is like a marriage, you have to believe in it

investmentnews.com:

When it comes to the current M&A landscape, Jessica Polito compares it to a marriage, remarking there’s been a shift in mindset over the last few years of looking at M&A as “an additive partnership,” rather than a financial transaction.

“When you start dating people, you choose one to go out with, but you still have to meet their friends and their parents. By the time you get engaged and you’re standing on the altar, you can’t imagine life without them, but it’s iterative. It takes a lot of difficult conversations to get to a point where you believe in the partnership,” the founder and principal at Turkey Hill Management, says.

Mergers and acquisition are the same thing and advisors have to be cautious, she says, because “there are a lot of really good firms out there that might not be the right fit. It doesn’t make them bad firms. It just means you have to do your homework.”

Polito notes that the M&A landscape is “an interesting time” because while it’s been really busy, there’s also the attribution of private equity that’s occurred over the last few years.

“It’s capitalized firms that historically couldn’t participate in processes,” she noted. “What that’s done is it’s allowed sellers the opportunity to be selective in who they decide to partner with, and it’s allowed buyers to grow in a way that otherwise wasn’t available to them before.”

Polito’s view meets industry expectations as a recent report from Advisor Growth Strategies expected increased use of equity consideration among buyers and sellers. However, despite M&A being the industry’s current FOMO phenomenon, Polito believes that it can be “distracting,” highlighting that smaller RIAs might be better off investing their time and resources into organic growth.

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