Mercer Advisors has been by far the most energetic acquirer of wealth management firms over recent years. US correspondent Charles Paikert talks to experts on what is driving the business's strategy, and why it has managed to achieve so many deals.

This is the first in a series of articles featuring highlights of the RIA business in 2022 and prospects for 2023.

The numbers don’t lie: Mercer Advisors was the leading RIA acquirer in 2022, closing 18 transactions, six more than their nearest competitors, Creative Planning and Wealth Enhancement Group – in a year where fourth quarter M&A volume plummeted. 

That’s on top of 16 deals last year and a staggering total of 73 acquisitions since the firm started buying in 2016, culminating in more than $37 billion in assets under management.

So how does Mercer do it?

Having very, very deep pockets and a stellar executive team of savvy, experienced dealmakers pitching an attractive business model that has a proven track record helps. A lot.

Capital resources
Backed by private equity powerhouses Genstar Capital and Oak Hill Capital, Mercer has “access to capital compared to others who have not so much,” said Matt Crow, president of Memphis-based M&A valuation firm Mercer Capital (no affiliation).

Backing by well-funded PE partners is “indispensable” for an RIA buyer said Mercer vice chair and head of M&A Dave Barton. Acquirers “can’t do enough deals off their own balance sheet,” Barton said. “You have to use credit.”

Executive prowess
Barton and CEO Dave Welling are widely considered to be the most formidable executive tandem in the industry. The duo have been “key to putting Mercer on a path to success,” according to veteran industry observer Mark Tibergien, the former CEO of Pershing Advisor Services. 

Barton, a civil litigation attorney who did legal work for Mercer, joined the firm in 2000 and teamed up with private equity Lovell Minnick to buy out his partners several years later. He became CEO in 2008 and jump-started Mercer’s inorganic growth strategy in 2016 with eight acquisitions. 

Welling, who was CEO at Black Diamond and previously a senior executive at Charles Schwab and a consultant at Bain & Co, was brought in the following year to run the company and allow Barton to concentrate on M&A.

While holding positions known to harbor large egos, both men “are very likeable,” noted investment banker Steve Levitt, managing director of Park Sutton Advisors. Barton’s reputation as a dealmaker has been “awesome,” according to Dan Seivert, CEO of M&A specialists ECHELON Partners. In addition to his considerable business development and negotiating skills, Barton “engenders trust, keeps his word and goes the extra mile to help sellers feel comfortable,” Seivert said.  

Differentiation
Mercer’s “family office approach,” built on a service model of providing clients with in-house attorneys, accountants and trust and estate expertise is the firm’s competitive differentiation, according to Barton. “That’s the secret sauce.”

Veteran industry consultant Tim Welsh agreed. “Mercer has a better service model,” he said. “They provide advisors with end-to-end solutions and that’s very attractive.”

Consistency
Mercer is a centralized, integrated operation with one brand, sales, marketing and service model and investment philosophy.

“They are very consistent and methodical,” said David DeVoe, principal of San Francisco-based RIA consultancy DeVoe & Co. “Working with Mercer in St Louis is the same as working with them in New York. They create a similar client experience and that matters.”

CEO Welling contrasted Mercer’s “one team” approach with the firm’s rivals in a 2020 interview with RIAIntel. “We didn’t like the Focus Financial or Hightower model,” he said. “There’s not a lot of loyalty to the mothership there. It’s a holding company really. Our philosophy is we’re going to be one team.”

Discipline
“Mercer is very disciplined,” Welsh said. “They’re very targeted in the firms they go after and while they bid competitively, they won’t overpay and are willing to walk away from a deal.”

For years, Mercer targeted mid-level and smaller RIAs with assets usually considerably less than $1 billion.

The smallest acquisition had $120 million AuM: the largest had just over $1 billion, with the exception of the largest purchase in Mercer’s history, the UHNW Silicon Valley firm Regis Management, which has close to $5 billion in assets.

Barton said he looks for advisory firms with an investment philosophy comparable with Mercer’s non-stock-picking approach, which concentrate on financial planning. Geography is also a key consideration, he added: “We look for markets where we can build concentration and increase market share.”

In its early days, Mercer built its business by doing qualified plan work for dental practices. More recently, the acquirer has made an effort to seek out RIAs that are either owned or run by women.

Track record
Seventy-plus transactions in six years is a lot of deals. “Mercer shakes the trees, but based on their previous success, people also reach out to them,” Seivert said.

“Mercer has a story that resonates with RIAs,” observed attorney Brian Hamburger, CEO of the New Jersey-based compliance consulting firm MarketCounsel. “They’re an emerging national firm with like-minded individuals.”

And having a successful track record, as investment banker Levitt put it, “is part of the formula for success.”