How To Merge Your RIA With Another Firm

Executive Summary

The M&A headlines have been the same for three years running and they are accurate. DeVoe counted 322 announced RIA transactions in 2025, an 18% jump over the previous record of 272, in what everyone in the industry now describes as the new normal rather than a wave. Every conference panel says the same thing, there has never been a better time to be a seller, the buyers have capital and they are not slowing down.

Read the rest of that report and the picture narrows fast. The average selling firm in 2025 managed just above $1 billion. Deals for firms under $500 million fell to 38% of all transactions from 46% the year before, and there were 22 fewer buyers doing 50 more deals. The market got bigger and pickier at the same time. Of the 12,652 non-exempt firms in our database that report regulatory assets, 12,648 of them sit below that average target size. That’s 99.97%. For almost every firm in this industry the record M&A market is something happening to other people, and the transaction actually available is a merger with a peer, which works nothing like the sale everybody is writing about. What it takes to merge your RIA with another firm is mostly governance and client consent, and the price turns out to be the part that matters least.

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Renee was an advisor we talked with this spring. Fifty-eight, about $70 million, eleven years on her own after leaving a wirehouse, and a good practice by every measure except the one that was bothering her. She had no bench and no plan.

She’d had coffee twice with a firm the town over, two partners in their forties, similar size, similar clients. The conversation had gotten as far as both sides saying they were interested and then stalled, because neither of them knew what the next step actually was.

What Renee asked was what the firm was worth. That’s the wrong first question in a merger and it’s the one everybody asks.

The Record M&A Market Runs Past Firms Under $500 Million

The numbers are worth sitting with before anything else, because they change which conversation you should be having.

Our data comes from the SEC’s adviser registration filings. Of the 12,652 non-exempt firms reporting regulatory assets under management, 12,000 are under $100 million. That’s 94.8%. More than half, 6,862 of them, are under $25 million. Renee at $70 million is not a small firm by the standards of this industry, she’s slightly above the middle of it.

She’s also invisible to the buyers in DeVoe’s count. A buyer underwriting a $1 billion target has a cost of diligence that doesn’t shrink for a $70 million firm, so it doesn’t do the deal. That’s arithmetic on their side. And the share of deals going to firms under $500 million is falling, not rising, which means the trend is running away from her rather than toward her.

There’s a second number in our data that explains why this keeps coming up. Of the solo firms we track, 2,617 have a sole advisor with thirty or more years of career history on file. Those are firms with a real succession problem and no internal answer to it, and most of them will never get a call from a buyer. The merger with a peer is what’s left, and it’s a genuinely good option that gets treated as a consolation prize because nobody writes about it.

In A Merger Nobody Gets Cashed Out At Closing

Here is the difference that Renee hadn’t internalized, and it reframes everything after it.

In a sale you hand over the firm and you get paid, some cash at close, some in a note or an earnout, and then you work through a transition period and you’re done. In a merger the two firms combine and both owners keep owning, in new proportions, of a bigger thing. There is usually no check at closing at all. What you get is a larger share of a firm that should be worth more than your piece of it was on its own.

That has three consequences worth naming plainly.

You aren’t done. A merger is the beginning of a working relationship with people you now cannot easily get away from, and if you were merging in order to stop working, you picked the wrong transaction. Renee’s honest answer, when we pushed on it, was that she wanted five more good years and then a real exit. A merger can produce that, the merged firm buys her out at the end. That gets written down at the start.

Your money is still at risk. Sale proceeds are yours. Merger equity rises and falls with a firm that other people now help run. If the combined firm loses clients in the first year, you paid for that.

And the governance question is the deal. In a sale the buyer decides things afterward and that’s understood. In a merger of two similar firms, nobody has decided who decides, and that is what kills these. Two owners at 50/50 with no tiebreaker is not a governance structure, it’s a coin flip you’ve agreed to make together every time you disagree.

How Two RIAs Get Valued Against Each Other

Renee’s question was what her firm was worth. In a merger the number that matters is the ratio.

Nobody’s paying anybody, so the absolute valuations only matter to the extent they set relative ownership. If her firm is worth $2 million and theirs is worth $4 million on the same method, she owns a third of the combined firm. Get the method consistent and the absolute numbers can be roughly wrong without doing much damage. Use two different methods on the two firms and the error goes straight into the ownership split, permanently.

So both firms get valued the same way, on the same date, by the same person. That’s the whole discipline. An independent valuation on both sides costs real money and it’s the cheapest part of the deal.

The inputs that move the ratio are the ones people argue about. Recurring revenue counts more than total revenue. Client concentration cuts both ways and a firm where the top ten households are half of revenue gets marked down. Age of the client base matters, and so does age of the advisor, because a firm whose owner is retiring in three years is contributing a decaying asset to the merger and the ratio should say so. Margin matters, and this is where solo firms usually get a surprise, because an owner who pays himself whatever is left has no visible margin at all until someone normalizes his compensation to what it would cost to replace him.

Then there’s the part that isn’t in the spreadsheet. Two firms merging usually have different fee schedules, different minimums, different service models, different custodians. Every one of those is a decision the combined firm has to make and each one moves revenue. Deciding them before you sign is tedious and it’s the reason some of these work.

Client Consent Is The Step That Voids Contracts When Skipped

This is the piece that has actual legal teeth and it is regularly discovered late.

Under Section 205(a)(2) of the Advisers Act, an advisory contract has to provide that no assignment of it gets made without the client’s consent. And assignment is defined broadly, covering the direct or indirect transfer of the contract and also the transfer of a controlling block of the adviser’s outstanding voting securities. So a merger structured as a change of control triggers the consent requirement even though no individual contract is being handed to anybody.

The consequence of getting it wrong is not a fine and a warning. Advisory contracts for clients who never consented are void from the date of the assignment, which means fees collected under them were collected without a valid contract.

Consent comes in two flavors and which one you need is set by your own paperwork. A Lexis Practice Advisor guide to change of control transactions walks through it. Negative consent, where a client’s silence counts as agreement, was approved through a series of SEC no-action letters in the 1980s, and the Form ADV-W instructions say consent can be actual or inferred through negative consent. But affirmative consent is likely required if your contract says assignment needs written or express consent. Contracts that are silent on the form of consent can usually rely on negative. So the answer is in the agreements you already signed, and somebody has to read them, all of them, before the structure gets chosen.

Timing is not casual either. The SEC has commented only on consent periods of at least 45 to 60 days. A common approach is notice ahead of the transaction plus a second window afterward for the client to object in writing. Thirty days shows up in practice and it’s outside what the staff has blessed.

The practical read for two small firms is that this step sets the calendar. You are not closing next month.

Form ADV Succession Decides Whether You Keep Your CRD Number

The Form ADV instructions split what happens to your registration into two paths and the difference is bigger than it looks.

Succession by application is the path when one firm takes over substantially all of the assets and liabilities of another’s advisory business and isn’t already registered. That firm files a brand new application, gets new registration numbers, and has to file it within thirty days after the succession. It can lean on the acquired adviser’s registration in the meantime, but only while that adviser has stopped conducting advisory activities. Once the new registration is effective, a Form ADV-W goes in to withdraw the old one.

Succession by amendment is the other path, and it applies when the new entity comes out of a change in form of organization or a reorganization and there’s been no practical change in control or management. Then you amend the existing registration, keep your numbers, and file no ADV-W at all.

Two firms genuinely merging as equals rarely qualify for the second one, because a real change in control is exactly what happened. Which means the more common shape is that one firm’s registration survives and the other’s gets withdrawn, and everybody’s clients repaper onto the surviving firm’s agreements. Deciding early which entity survives is not a formality, it determines whose CRD number, whose disciplinary history, whose ADV and whose brochure the combined firm carries forward.

Both owners also become control persons of the survivor, which is Item 10 and Schedule A, amended through Schedule C, with the same 5% direct owner threshold that applies to any ownership change.

The Order Of Operations For Merging With Another RIA

Five steps to merge your RIA with another firm, and the ordering is the useful part, because most stalled merger conversations are stalled on step four when they never finished step one.

1. Decide what you each want out of it before anybody values anything. Renee wanted five more years and then an exit. The two partners across town wanted scale and a second office. Those are compatible, but only if the exit gets built into the deal on day one rather than raised in year four. Two firms that want the same thing are a harder merger than two firms that want different compatible things.
2. Settle governance before economics. Who decides on hiring, on the fee schedule, on taking a loan, on admitting a new partner. Write down what needs unanimity, what needs a majority, and what one person just does. A two-owner firm needs a tiebreaker named in advance, an outside board seat or a deadlock provision with teeth.
3. Value both firms the same way on the same date with the same valuer, and convert that into an ownership ratio rather than a price. Normalize both owners’ compensation first or the margins aren’t comparable.
4. Read every advisory agreement and pick the consent path the contracts allow. Then build the calendar backward from a 45 to 60 day consent window, and choose which registration survives.
5. Paper the exit on the way in. Buy-sell with a real valuation formula, what happens on death, disability, departure and deadlock, and how a retiring owner gets bought out. The merger agreement that has no exit in it is the one that ends in a lawyer’s office.

Renee and the firm across town are still talking. What changed is that they stopped negotiating price and started with what each side wanted the firm to look like in five years, and it turned out one of the partners had assumed she’d stay indefinitely. Better to find that out over coffee than after signing.

The honest summary is that a merger is more work than a sale and it’s available to firms a sale isn’t. If you’d rather add capacity than combine firms, bringing on another advisor is the other version of this decision, with its own filings and its own paperwork. And a merger is one of several exits, which we laid out in the four paths to succession. More on this side of running a firm is on our succession planning page.

Our goal is to make sure advisors know what options are available and make it easier to find those options.