It’s not just the multiple, it’s the vibe.

A few weeks ago, I came across an article in Financial Advisor that I haven’t been able to stop thinking about. Call it confirmation bias, call it a small sample size, but to me it rings true because I’ve seen it happen.

The article referenced a study of 311 advisors who sold their firms; nearly half of them were dissatisfied with the outcome. And when the researchers dug into why they were disappointed, the numbers were exactly what I would have guessed.  Eighty-seven percent said the acquirer overpromised and underdelivered, higher than expected, but it rings true.  Seventy-five percent who said the headline multiple wasn’t the real outcome was a no-brainer; I’ve written about that before.  What stuck out for me was this one; nearly sixty percent said they underestimated the cultural shift.  As I said, I would have guessed that one because I’ve seen it before. In fact, I would have bet the number would be a bit higher.  To prove my point, let me tell you about Carol (not her real name). 

The “Sale”

Carol was an independent financial advisor who was approaching seventy years old. She had a solid, midsize book of business with wonderful relationships and the kind of clients who came to her not because she beat the market, but because she understood their lives. She planned with them, not at them. And she had a team around her that was genuinely excellent. But she also knew the honest truth: her clients deserved continuity. Her staff deserved a future, and she deserved to think about slowing down and what came next. So, she started talking to potential partners.

The first conversations went well. The multiple was strong; the responsiveness was impressive. Every call got answered quickly. Every question got a thoughtful and detailed response. The people on the other side of the table seemed to understand what she had built and what it meant to her. It was obvious they had done this many, many times before. They talked about her firm’s unique culture, and they talked about keeping her team intact. They talked about serving her clients the way she had always served them. It felt right to her, so she continued to move forward to a sale. But then something shifted.

The relationship manager who had been her main contact moved on to the next deal, and suddenly the conversations were different. The communications became more transactional and less about what Carol wanted and more about what the acquiring firm needed from her. The platforms Carol used were suddenly “not up to par.”  The staff started getting scrutinized based on their compensation structure and duties, not on their value and continuity. Questions started appearing around the book of business and her small niche.  Things like client concentration, about whether certain revenue streams were sustainable, about whether her costs could be lower, became more pointed and frequent. 

And the multiple, which had looked strong on paper, started to look different when you read the fine print. The back end was loaded with aggressive growth hurdles. The kind of targets she hadn’t needed to hit since she was first starting out. Carol could see where this was heading. And she made a decision that most advisors never make.   Instead of holding her nose and signing, she killed the deal.

The Thing That Isn’t in the Term Sheet

When she called to tell me she was walking away from the sale, she said something like: It wasn’t about the number. The number was fine. It was the vibe. And the vibe was wrong. That is perhaps the most honest assessment of an acquisition I have ever heard.

Fortunately, she found a different partner. The multiple was comparable to the previous number (without the unreachable growth goals). She had done her due diligence on the firm’s “vibe” before anything else.  She had met the partners and staff, talked to the last three transitions, and asked them detailed questions. What she found was that the promises were similar, but this time, the relationship manager didn’t disappear after the handshake.  The integration team stayed in the conversation as a partner, not as a task master. She knew the people, she knew the culture was a fit long before she signed on the dotted line.

The Reframe

I have been in this business for more than a decade. The advisors who come through transactions satisfied are rarely the ones who optimized the number. They are the ones who optimized the fit. Not fit in theory, fit in practice, every day. She focused on the people you actually talk with day to day instead of the person selling the dream.

The research says fifty percent of sellers regret the sale. They regretted the promises made but not kept, the multiple that won’t be hit, but they also regretted the vibe. So here is the question I want to leave you with: if you are thinking about a transaction, are you evaluating the multiple or are you evaluating the vibe?

Because you are going to have to live with the decision, you may as well be happy about it.