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What M&A Partners Talk About When They Talk About ‘Culture’

By Thomas Coyle June 6, 2018

Like other mergers of retail RIAs, principals at EP Wealth Advisors and Donnelly Wealth Advisors say their tie-in, announced Monday, owes a lot to the sometimes nebulous concept of “culture.”

“Ultimately culture is one of the most important things” to a successful merger, EP president and CEO Patrick Goshtigian tells FA-IQ. But pinning down what culture means for these firms — and how more precisely it contributes to cohesion — calls for drilling down into motivations.

In Goshtigian’s view, merger-affirming culture starts with two firms taking a similar approach to clients. For instance, he says Torrance, Calif.-based EP and San Diego-based Donnelly both lead with financial planning and view other aspects of wealth management — including money management — as “an extension” of that central process.

“Some firms are more investment-oriented,” says Goshtigian, whose firm managed $3.6 billion at the end of March. “That’s a very important part of the big picture, but our emphasis is on financial planning.” This stance gives the merging firms in this case credible claims to being “client centric” at their respective cores, he adds.

From a cultural perspective it also helps a merger to succeed when one of the firms — and in this instance it’s Donnelly Wealth Advisors — has the wherewithal to enhance a common offering, according to Goshtigian. “They’ve got an emphasis on life planning,” he says of Donnelly Wealth Advisors’ commitment to helping clients engage with their finances as supports to a successful and fulfilling life, rather than as a separate — and often somewhat irksome — aspect of their existence.

“We can learn from them,” says Goshtigian, referring to Donnelly Wealth Advisors, a firm that managed about $420 million on its own. “With their emphasis on financial life planning — and their accreditations in that — we will learn something we can take into the next generation.”

Besides Donnelly Wealth Advisors founder Rich Donnelly, who holds the Registered Life Planner designation, two of his younger colleagues with FLPs, Bradley Owen and Adam Werner, are slated for leadership roles in the merged firm, according to an EP press release.

But EP, which prior to its purchase of Donnelly Wealth Advisors employed about 60 people in 10 offices in California, Washington and Colorado, had two vital traits to offer Donnelly Wealth Advisors as well: experience and scale.

This acquisition is EP’s third in 12 months, and its second since Wealth Partners Capital Group took a minority stake in EP last summer. Wealth Partners is a San Francisco- and Palm Beach, Fla.-based holding company that helps EP and two other operating wealth management affiliates — Cleveland-based MAI Capital Management and New York-based Forbes Family Trust — identify potential merger partners and execute transactions.

While Rich Gill of Wealth Partners is quick to say EP and Donnelly Wealth Advisors share a “cultural alignment” demonstrated by “a deep-rooted commitment to their clients” that makes for “an ideal partnership,” he doesn’t mince words about the importance of clout. EP, he says, “has the resources and tools” to help Donnelly Wealth Advisors “spend more time serving its clients by providing a scalable back office infrastructure.”

The result, adds Gill, could make EP’s new office in San Diego an area powerhouse. And that’s an aspiration in keeping with EP’s desire to be a viable destination for smaller RIAs looking for senior merger partners in the western U.S.

From Donnelly’s perspective, common culture in the form of a shared view on client relationships and best strategies for adding value is crucial, but it doesn’t go far by itself unless the folks involved get along really well.

“A lot of people out there want to buy your firm,” Donnelly tells FA-IQ. “But my intention was to make this business persist for my clients and the people who work here.” And to pull that off, he says, “you need a merger of like hearts as well as like minds and like cultures.”

Patrick Goshtigian

For Donnelly, the road to this merger included stops at about 10 other firms, with four of those resulting in fairly serious talks.

With EP, however, the talks continued, culminating in a deal that — so far at least — seems to make both sides pretty happy.

“An awful lot of time and thought went into this,” Donnelly tells FA-IQ. “It’s not a shotgun marriage; it’s something that grew out of the fact that the people at EP think the way we do. Culturally, they’re a bigger version of us.”

EP’s purchase of Donnelly Wealth Advisors was completed on May 30. The firms involved declined to disclose the financial and legal terms of the deal.