How to sell my investment management firm?

You might be wondering:

– How much will my investment management firm sell for? 

– How do I determine an asking price? 

– How do I find potential buyers to sell my investment management firm?

– How to sell my investment management firm through a broker?  

On the last question:  Use a broker when you only need a connection to a buyer (i.e. when selling real estate or stocks).  Instead, use an M&A advisor to sell your business because what you need is vastly more complex.  Details on that and more answers are ahead.

Think Years, Not Months

If you’re wondering how to sell your investment management firm and walk away after closing, it isn’t possible.

Much of the value of an investment management firm is tied to its owners — to their expertise, reputation, and relationships.  In most successful sales, that value is transferred to a buyer over a multi-year transition during which the seller works 2 to 35 hours per week.  The seller should have a sales- or profit-sharing incentive to complete an effective transition.  Consequently, most investment management firms cannot simply be sold for just a fixed payment at closing.  This is especially true for selling a small investment management firm.  It applies to almost all investment management firms to varying degrees, and largely depending on firm size.

Seller Beware: Protect Yourself

Because selling an investment management firm entails sharing sales or profit with a buyer you have just met, you need protection.  We recommend the following:

(1) List the adverse outcomes that can occur.  For each, design a resolution mechanism that protects your assets.

(2) List the possible disputes that can arise between you and your buyer.  For each, implement a binding procedure for resolving the dispute fairly and at a low cost, ideally without involving courts or lawyers.

 Deep expertise in designing protection mechanisms matters.  (Hint: We are exceptional at it.)  Lawyers will draft the legal language that implements protections in a contract, but only a capable advisor can design protection mechanisms.  Proper protection design requires economics and finance expertise, not legal expertise.

Sell by Auction or Not?

You might be seeking exit strategies for investment management firms.

Did you know you can sell your investment management firm via an auction?  If you are like other investment managers and have a strong preference for orderliness, then an auction can be perfect for you.  

The first step in selling your investment management firm is selecting one of two sale mechanisms:

Option 1: Auction Mechanism

If you wonder “how to sell an investment management firm for maximum price,” look here:

There are several differences between the auctions we see in movies and an auction mechanism for selling investment management firms.  Here are a couple:

(1) Bids will entail several numbers in addition to purchase price.  For example, the percent of the price paid through a multi-year seller note and your compensation during the transition period are two other numbers that could be included in a bid.

(2) The winning bidder will be selected based on a valuation formula that calculates how much each bid is worth to you.

(3) The bidders will not be aware of each other’s bids.

What are the benefits of selling my investment management firm via auction?  

(1) If we have at least two bidders, then an auction will generate more value for you than an ad hoc mechanism.  This is how to sell an investment management firm for maximal price.

(2) The business is more likely to end up in the hands of the right person.

(3) The high amount of structure required for an auction forces everyone to produce and act upon a high degree of clarity early in the process.  This reduces the likelihood of the deal falling through late in the process.

What are the disadvantages if I sell my investment management firm via auction?

(1) There is somewhat more work to do upfront:  (a) Closing documents need to be generated upfront rather than late in the process.  (b) We need to decide upfront on precisely how you would value different possible deal structures.

(2) You have less flexibility.  Once you have executed an auction agreement with the prospective acquirers, you cannot back out of it.

Option 2: Ad Hoc Mechanism

If you’re thinking, “I want to sell my investment management firm the old fashioned way, and an auction sounds too complex,” look here:

In this mechanism, we negotiate with each prospective buyer one-on-one.  If you like what someone offers, you move forward with them.  If you are uncertain about their offer, we ask them to wait until we have more offers. 

What are the benefits of selling my investment management firm via ad hoc mechanism?  

(1) Less work is required before engaging prospective buyers.

(2) You commit practically nothing to the acquirer until final closing documents are signed, which is relatively late in the process.  This implies that you are free to change your mind until then.

What are the disadvantages if I sell my investment management firm this way?

(1) If you ask a prospective buyer to wait until you have fielded more offers, you risk losing them because they might find another opportunity.

(2) The best prospective buyer might drive a hard bargain, offering too little.  A less qualified prospective buyer might not drive such a hard bargain.  As a result, you might go forward with the less qualified buyer.  It is important that we find the best buyer because everyone wins when that is the case.

(3) Because this is a less structured process, with less agreed upon upfront, it is more likely that the deal will fall apart after a non-binding offer is accepted.  This can result in significant lost time, money, and energy.

Optimal Deal Structure

If an owner commanded, “Sell my investment management firm for the highest possible price!” then I would say, “Be careful what you wish for.  You probably wouldn’t sell at a price of $10 million paid over 100 years with a 0.1% interest rate.”

The correct mandate is, “Sell my investment management firm under a deal structure that maximizes the net present value of my future cash flows, considering expected and worst case scenarios, and that allows me to exit comfortably on my realistic timeline.”

Deal structure is the set of terms in your sale contract that affect the timing, contingencies, and amount of payments you receive.

In the investment management industry, successful firms have long-term clients for which they perform annual services related to audits, taxes, and financial reporting.  It can be sensible for some of your payment to be tied to the retention of these long-term clients.

If you are open to a broader array of deal terms, you will have a larger pool of prospective acquirers.  That translates to extracting more value out of your firm.  For example, if a handful of clients comprise a large portion of your services revenue, then it will be difficult to attract buyers without tying part of your sale price to the retention of those big clients.

How much do investment management firms sell for?

The deal structure is equally as important as the purchase price.  If you want to sell your investment management firm, you can value it in two ways:

(1) Discounted cash flow method.  We will analyze your currently client relationships and marketing mechanisms.  Based on that, we will project your revenue in future years under a best case, worst case, and expected case scenario.  We will project your costs and expenses given their current levels.  This will allow us to project your firm’s operating cash flows under each scenario.  We will then sum up the values of each future year’s operating cash flow, discounting it by dividing it by (1+r)^number of years in the future.  We will determine the value of r by analyzing the volatility of your historic cash flows relative to historic stock market performance.

(2) Comparables method.  We have data on past sales of investment management firms.  Using comparable sales data, we will infer the value of your firm.  For example, we know that the median investment management firm sold for 2.18 times seller’s discretionary earnings.  That is low.  Using the optimal deal structure and selling mechanism, we can achieve a higher valuation than that.

What are the steps to sell my investment management firm?

 Several of these steps occur in parallel:

(1) Consultation If you contact us at or 407-256-1482, we will provide more information tailored to your investment management firm regarding everything on this page.  From this conversation, you will understand your options.

(2) Valuation.  We will conduct a valuation by the above methods.  If you wish to sell your investment management firm via an auction mechanism, we will develop a model enabling us to value every acceptable deal structure.

(3) Materials Preparation.  We will prepare a 50-page memorandum, 2-pager, and brief messaging that we will use to convey the opportunity of buying your investment management firm .  If you wish to sell via auction, we will work with our economical attorney or yours to develop the auction and closing documents.

(4) Targeting.  We will determine the criteria for the companies and individuals that would be suitable acquirers of your investment management firm.  Criteria can involve size, geography, specialty, years of experience, and more.

(5) Outreach.  We will contact buyers in several different ways, including contacting some of the 28,000 buyers in our network, sending direct messages to other individuals and companies who meet your criteria, and online advertisement on business for sale websites and professional job boards.  We will only introduce you to the most qualified prospects.

(6) Negotiation.  We receive offers, improve them, and work to pick the best one.  If we are using an auction, negotiation is automatic.

(7) Due Diligence and Closing.  The winning bidder conducts due diligence on your investment management firm.  If we are using an ad hoc mechanism, then in parallel their attorney produces closing documents.  Once all of that is concluded, the deal is closed.

(8) Post-Closing.  We will be available to help make your business sale successful.  We can create accounting dashboards that calculate the payments you are owed.  We are also available to act as administrators in any dispute resolution process described under the “Seller Beware: Protect Yourself” section.

We make selling investment management firms easy and lucrative

At Next Bridge Advisors, we sell investment management firms and other professional services firms anywhere in the United States.

Having been established for 13 years, we have built a network of 28,000 buyers and a unique combination of expertise in the finance, marketing, structuring, and dispute prevention aspects of business sales.  

Email us at or learn how to maximize your earnings from selling an accountancy practice.