Big T-12’s and Gigantic Deals Are a Perfect Storm


Last year’s T-12 and today’s mega-deals are setting up a perfect storm we haven’t seen in a decade.

If you think that loyalty isn’t what it used to be, last year was a good year, and that this year will be tough in the markets, then you’re looking at the first perfect storm to move firms in 11 years.

Everyone Moves on the Down

Advisors as a group trade on the way down. It’s exceedingly rare for an Advisor to recognize that special moment in time when his or her business has hit a respectable high and the Acquirers are paying more than they usually do. There is no question that this moment is staring right at you, whether you move or not. No one is smart enough to accurately predict real estate markets, and no one is smart enough to predict times when the firms are offering stupid money, as Advisor’s businesses are peaking.

Asset Awards Are Too High

When a firm is trying to acquire your business, they want you to bring 100% of your assets, 100% of your revenue and 100% of your clients. If a Broker has $3M in revenue on $300M in assets, a deal may be offered for $10M that will require the vast majority of the assets to travel within 60 days. Or worse, the deal requires revenue hurdles that essentially force the Broker to aggressively trade to make the bogeys. Not for you? Well, read the fine print because many Brokers are doing just that. Most of them are too late.

Trade on T-12

If your T-12 number is likely to be 10% or 30% higher in 2015 than in 2016, a $5M business will leave $100-$500K behind for each million of revenue you generate. Firms act as if they truly care to acquire you, but most of the noise you hear in the market are Managers trying to meet quarterly recruitment goals. New York could care less if you join. It’s a buyers’ market, and has been since the demise of the boutiques. There are fewer and fewer acquirers, and if there’s one number they will not bend on, it’s the amount of revenue that you generate.

2015 Will Be Remembered

The blowup of Credit Suisse and Barclays in 2015 generated a lot of movement in the marketplace. Many deals at all levels were done. Most of those deals will end up being dogs, with the firms overpaying for businesses that don’t check out. As soon as a few of those businesses start to show signs of stress, the deals at the majors will get tempered by exactly the amount of overages that the firms feel that they paid. It will not matter if a friend of yours received X. It will not matter if your business is a premium business.

Put Together Your Numbers

Right now we are seeing some of most storied teams – happy guys – look seriously at the exits in order to capitalize on the perfect storm that is surely occurring. It is a good idea to have your financials put together, and at least take a look at the offers. They will be going down, and will stay down – mostly due to the T-12 issue.