Mergers and acquisitions: 14 critical RIA technology considerations

It is widely known that large, well-capitalized RIA firms have been busy acquiring smaller RIAs at a record pace.

When RIA aggregators acquire smaller firms, everyone on both sides of the deal wants the smoothest transition possible.

During the M&A process, firms review financials and other aspects of the business to ensure a good fit; however, a major headache often occurs post-deal – integrating the selling firm into the buying firm’s technology infrastructure. Technology teams often encounter many hurdles in the process simply because the right questions were not asked, and vital information was not uncovered during the due diligence process.

I’ve outlined a roadmap to guide buying firms through technology considerations. This analysis addresses how a larger, buying firm should evaluate not only the selling firm’s technology, but also their own technology and capabilities to ensure each M&A deal is integrated successfully. This framework can also benefit small, selling firms in understanding what buyers are considering during the M&A process and what expectations they should anticipate.‍

What is your current infrastructure and technology strategy?

Before you begin, assess your current technology capabilities with the expectation that you may need to transfer data from various sources and vendors into your technology infrastructure. For example, client records from CRM or historical transactional data from portfolio accounting systems may need to be converted.  These questions can help in identifying any weaknesses that can hinder a smooth transition and ensure that your team is positioned for success.

• Does your technology team possess the technical skills set necessary to migrate and merge data with your systems or will you need outside help?
• Does your technology team have the bandwidth to support data conversion projects, or will your IT staff be overwhelmed with carrying out these tasks?
• Does your firm have sophisticated technology tools to assist in the process of handling complex data migration projects?
• Do any of your current vendor software resources assist with vendor-to-vendor conversions?
• Do you have project managers on staff to help guide and set expectations for project completion?

Gathering facts - What technology concerns exist?

Do your due diligence on the selling firm’s tech stack, available data records, and approach to conducting day-to-day business operations. This will uncover any major differences in business processes and preferences. Now is the time to be open and address all technology concerns. Acquisition deals should be partnerships where both parties feel confident and excited about the merger.

• Identify all technology tools and vendor partners the selling firm is currently using (review current contracts with vendors to identify opt-out clauses).
• Review the firm data that will need to be converted into your firm. How accessible is extraction of the current data and is it compatible within the new business structure? 
• Will the acquisition fit into your firm’s technology strategy, or will it create new complexities and challenges that will cause issues integrating into your systems?
• Ask for samples of deliverables. Are there any characteristics of these client-facing deliverables that will not be available to the selling firm once integrated into your tech stack? 
• Dig into the firm’s client digital experience. How will the client experience change once it is a part of your firm?
• Will there be hurt feelings and frustrations from the selling firm over having to give up certain technology tools or capabilities?

What strengths does the selling firm offer?

While you as the buying firm possess your own technology strategy, take time to consider any strengths that the selling firm has developed. You may be impressed with a specific workflow process that the firm excels at or that a technology software tool is superior to the one in your own tech stack. If so, consider how you can potentially incorporate these strengths into your firm post-merger.

• What does the selling firm do well that you can incorporate into your firm’s technology strategy?
• Are there any specific tools in your current tech stack that don’t seem to be highly regarded among advisors and staff?
• What unique characteristics does the selling firm possess that have contributed to its success and how can you leverage these strengths?

Bringing two systems together will never be totally painless but understanding up front where challenges may arise can help firms plan and prepare to limit that pain. It will also help after the merger is finalized, because you’ll know how and where to provide support with guidance and training on the new technology processes.

This article originally appeared in F2 Strategy Insights. F2 Strategy Co-Founder and CEO Doug Fritz is a member of the Action! Leaders Group.