According to the National Association of Plan Advisors, mergers and acquisitions deal volume for Registered Investment Adviseors (RIAs) rose in the third quarter of 2023, reaching its highest level in more than 12 months. Many of these mergers and acquisitions were no doubt spurred by the numerous benefits RIAs may experience after closing such deals. These include more robustbetter support departments, boosted balance sheets, and higher marketing budgets. In order to take advantage of these various benefits, however, RIAs must navigate mergers and acquisitions efficiently. There are many complexities and considerations to factor in, and a qualified mergers and acquisitions lawyer can offer helpful guidance during this process. Consider reaching out to the Altitude Securities Law Office at (405) 534-4914 for targeted assistance. 

Mergers and Acquisitions: Specific Considerations for RIAs

MAlthough mergers and acquisitions represent complex processes for virtually all companies. However, , there are unique considerations that RIAs should keep in mind when navigating these deals. 

Potential Legal Disputes During Mergers and Acquisitions

A number of many legal issues may arise from RIA mergers and acquisitions. First, the owner of a smaller RIA may find it difficult to “let go.” After all, the Investment Adviser Association states that most RIAs are small, tight-knit teams with few employees. The owner of an RIA might struggle to watch the business they have worked so hard to build fall into the hands of a larger firm. They may regret the deal, and they might even try to take legal action to cancel an ongoing merger or acquisition. 

Another legal issue might involve liabilities that were never made clear. These include not only financial liabilities, but also unresolved legal actions. A larger firm might suddenly “inherit” various customers currently suing the RIA that they have just acquired. This potential issue underscoreshighlights the need for due diligence in mergers and acquisitions. An attorney experienced in working with RIAs may be able to assist firms in navigating this crucial step.

How to Ensure Brand Consistency in a Merger or Acquisition

Ensuring consistent brand identity can pose challengesshould be a top priority for RIAs following mergers or acquisitions. The RIA may find it difficult to maintain continuity in its messaging, but doing so is important to generating a sense of trustworthiness among clients. Beyond marketing and brand recognition considerations, an RIA’s communications to clients are strictly regulated, by the Securities and Exchange Commission (SEC) or state regulators, depending on the RIA’s own registration requirements. 

Branding challenges and the use of existing trademarks can present special concerns when the acquired RIA has built its clientele by establishing long-term advising relationships to which the firm’s advisers invest a great deal of individual attention. How does an acquiring firm, potentially much larger and consequently susceptible to the appearance of an “impersonal,” less-attentive approach, take advantage of the acquired RIA’s valuable reputation? an established track record based on its establishIt may be difficult to continue cultivating this brand identity, especially if the acquired RIA relies on its “small-time” to generate a sense of trustworthiness among its customers. How does a larger firm take advantage of this valuable brand image despite its larger size?

One option is a “dual-brand” approach. If the smaller RIA has a solid track record of attracting and maintaining clientscustomers with its down-to-earth, family style, there is no need to reinvent the wheel. A larger RIA can maintain the smaller brand “under its umbrella,” leaving very little unchanged. Another strategy is to create an entirely new brand that blends elements of both firms into one new identity. The RIA’s marketing and communications team may wish to consult with in-house or fractional counsel to determine the best ways to take advantage of both firms’ existing trademarks and communicate changes to each RIA’s clients while ensuring regulatory compliance. Ultimately, this is a question that the marketing team may need to address. 

Private Party Sales vs. Internal Sales

RIAs may need toshould approach mergers and acquisitions differently depending on whether they opt for private party sales or internal sales. An internal sale may involve a retiring adviser selecting a professional (usually an employee or partner) to “inherit” the firm. This type of acquisition functions essentially as a form of succession planning for RIAs, and typically means thatIn this type of acquisition, both parties will often have extensive knowledge of the various complexities and considerations involved with the deal.

A markedly different approach may be necessary in the event of a private party sale. This involves selling the RIA to a different firm – in many cases,usually for a lucrative cash payout. In this situation, both parties will inevitably approach the deal with far less familiarity. Often the RIA’s former owner willIt is common for RIA owners to  remain on the payroll, either as an employee or as an independent contractor, (either as employees or consultants) for a few years after these private sales to offer insights while streamlining the transition.

How Tto Merge RIA Firms Wwith Existing Trademarks

During a merger or acquisition, the RIA may encounter issues regarding existing trademarks. In many cases, these trademarks are incredibly valuable assets – representing intellectual property that an RIA has established over the course of many yearsdecades. Accordingly, RIAs will want to handle any existing It is important to approach trademarks carefully during mergers and acquisitions. An experienced RIA attorney with Altitude Securities Law Office may be able to help you determine the optimum trademark strategy for your RIA during a merger, and help you manage the sale or purchase of the intellectual property rights in an existing trademark during an RIA acquisition.

Options for Dealing Wwith Trademarks in Mergers & Acquisitions

There are several common methods for addressing potential merger and acquisition questions regarding RIA existing trademarks.questions regarding RIA existing trademarks during a mthese issues. The first is the assignment of existing trademarks to the new owner. This involves transferring ownership of an existing trademark from one company to the other. If a larger firm acquires a smaller RIA, for example, it might negotiate this assignment of trademark ownership as part of the overall deal. 

Another possibility is to license the trademark. This involves the smaller RIA giving its acquirer permission to use the trademark without actually transferring ownership. In the event of a merger, ownership of the trademark may occur in a somewhat automatic fashion because the two companies become a new entity – with all existing trademarks falling under the same “roof” of the new company. 

Legal Assistance in Addressing Trademarks During Mergers & Acquisitions

Whatever the case may be, RIAs will likely wish to work with attorneys experienced in navigating RIA compliance issues as well as their more general business concerns when handling trademark and other issues related to RIA mergers and acquisitions it is important to approach the question of trademark issues alongside a qualified, experienced mergers and acquisition law firm – such as Altitude Securities Law Office. Legal professionals may take various steps to ensure the long-term stability of intellectual property during and after mergers and acquisitions. First, they might conduct a trademark audit to determine the sum total of all trademarks owned by both parties in the merger or acquisition. After determining how the question of ownership will be addressed by both parties, a mergers and acquisitions (M&A) attorney M&A lawyers  may be able to identify potential legal disputes, consider international trademark protection, and choose the best strategies based on the unique circumstances surrounding each deal. 

Remember, there is no guarantee that both parties will have conducted proper due diligence when it comes to trademark protection. Even if one RIA has taken the issue of trademark law very seriously over the years, the other firm may have failed to do this. A merger or acquisition may uncover serious trademark issues that have gone unnoticed or unaddressed – issues that a lawyer may soon discover. 

Speak With a Qualified Mergers & Acquisitions Lawyer Today

While mergers and acquisitions present numerous complexities and considerations, RIAs can confidently navigate even the most complicated issues alongside a qualified M&A lawyer. A mergers and acquisitions attorney may be able tocan guide RIAs through these high-stakes deals, helping them experience the full range of benefits while mitigating legal issues and minimizing confusion. Reach out to the Altitude Securities Law Office today, and begin planning an upcoming merger or acquisition in an efficient manner. Call (405) 534-4914 to get started.