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Data Drives Value – Why Good CRM Systems Shine in M&A Processes

BY EMILY BLUE & RYAN HALLS
co-founders of hue partners

Stories drive connection. Advisors share stories every day with clients to build credibility, familiarity, and trust. But how do advisors tell their firm’s story when the audience is a potential acquirer? Does the P&L tell the story of a firm? Does the AUM report tell the story? While those are important data points, the advisory business is fundamentally a goodwill business. A transaction is the most important time to highlight relationships and the client stories that form the soul of the business. During an M&A journey, stories demonstrate the client connection and ultimately enhance the value of a firm.

One of the most important stories to potential buyers is how your RIA is growing and what is contributing to the firm’s organic growth. In fact, strong organic growth is one of the biggest drivers of premium valuations. Your growth story will help differentiate you from the rest. But how well do you really know your clients? Do you call them on their birthdays, anniversaries, or relevant religious holidays? Do you track the same events for clients’ children? Or even better, do you know when their driver’s license or passport expires so you can remind them to renew it before their upcoming trip to Europe? The only way to truly know, and credibly demonstrate that level of relationships with clients, is with a fully functioning CRM system. The more quality data you have around your existing and prospective clients, the more bespoke the stories you can tell, and ultimately confer why your goodwill deserves a premium valuation.

Can you readily identify what trends exist within your existing client base? Trends in demographics, professional niches, consistent referral sources, etc.:

  • What are your organic growth sources? Is it the same for all advisors in your firm?
  • What trends exist within your prospect pipeline?
  • What referral opportunities are untapped within your current client base?
  • Have you quantified the wallet share opportunities across the firm?

As founders prepare for M&A conversations, having great data hygiene is imperative. According to Amy DeTolla, a Wealth Transformation Leader, “A good CRM and clean, well-organized data are powerful assets and paramount in how your story is told. It can play a significant role in showcasing the operational excellence, growth potential, and overall value proposition of an RIA to potential acquirers.” The data inspire and support the amazing stories shared with potential buyers, which garners interest and drives value.

Easily accessible and clean data pay dividends during an M&A process, both on the front and back end of the process. Founders know that clients will have to consent to any transaction, and higher quality CRM data elevate advisor confidence going into those conversations. One founder shared with us that they paused the entire acquisition process to get their house in order before making one of the largest decisions of their life. Through reflection and internal discussions, they realized they were not quite ready to enter the M&A arena. They knew the importance of how the front-end investment would be well worth the effort later in the process. They spent the time and energy investing in scrubbing their client data and focusing energy on organic growth opportunities within their book. The second time around, they had significant confidence going into M&A conversations. They had always been proud of the business they had built, and they knew the anecdotes to brag about, but now they had the actual data to support those stories.

Fast forward, as a seller enters the confirmatory due diligence phase, clean data provides significant credibility. Additionally, it ensures client communication processes are nothing to worry about. Quality client data also makes the transition process significantly less concerning. Another founder shared his experience of the M&A process firsthand: “Without a good CRM, you’re dead in the water, in my opinion. There was so much data requested of our firm during the diligence phase of the acquisition. It was incredibly helpful to have clean data that could be easily filtered.” During the diligence phase, the below anonymized data that is often requested:

  • Client age
  • Geography
  • Firm tenure
  • Profession
  • Multi-generational connection

Firms that don’t have clean data sometimes are inclined to kick the can down the road. What they don’t realize is how their data being in disarray can negatively impact them during an M&A journey.

Imagine being a home buyer and touring a staged home that is pristine both inside and out. Naturally, you then start asking questions about when the remodel was completed, how old are the appliances, and any maintenance history records. If the seller doesn’t readily have that information, you quickly lose confidence, no matter how perfect the house looks. Supporting data matters!

The RIA market is no different. RIA transactions are centered around goodwill – the relationship between advisors and clients. With goodwill-centered transactions, the data to support the business is incredibly important and valuable. We all know that advisors build deep relationships with their clients, often with over a decade of tenure. Unfortunately, most CRMs don’t tell the full story with just transactions and meeting notes. There is true value to unlock in the relationship history and story. That relationship history creates the story opportunities as you go to sell the business. The stories are the heartbeat of the business.

Just like you wouldn’t let people tour your home that is on the market without proper staging and supporting information, sellers should think about having a functioning CRM as an investment that creates and validates enterprise value. Even if you do not plan to sell anytime soon, a strong CRM will help you more easily identify organic growth avenues and opportunities, further driving wallet share growth (and future sale value).

As the leader of your firm, you are the Chief Storyteller, and thus responsible for the data to support thoughtful client interactions. Regardless of where you are in your business journey, the value of your firm depends on your data and the ability to support the special relationships and goodwill that make this industry special.

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Emily Blue

Emily Blue is a Co-Founder of Hue Partners. Prior to launching Hue, Emily was the Head of Corporate Development for Caprock where she led M&A deal structuring and negotiations. Before that, Emily was a Director of M&A with Mariner where she lived and breathed post-deal corporate integration. As a CFA® Charter Holder, Emily started her career in asset management. Emily resides in Kansas City with her husband and three children.

Ryan Halls

Ryan Halls is a Co-Founder of Hue Partners. Prior to launching Hue, Ryan was a Principal on the M&A team for Focus Financial Partners where he led all phases of M&A from sourcing to post-close integration. Before that, Ryan was an advisor with Venturi Private Wealth, a leading multi-family office. Ryan started his career at Vanguard where he supported financial advisors and institutional clients. He lives in Austin with his wife and three boys.


Hue Partners

At Hue Partners, we believe Mergers and Acquisitions should be grounded in relationships. Hue was specifically designed for founders, by founders, who appreciate the power of trusting partnerships.

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