Michael Gray, leader of the Private Equity, Venture Capital & Growth Companies and Fund Formation & Investment Management practices, was featured by Investment News on how the Federal Reserve’s first interest rate hike in three years is likely to impact the volume and pricing of registered investor advisor- (RIA) driven mergers and acquisitions.
“I for sure think that the increase in interest rates last week and the hawkish implications by the Fed will have an impact on the volume of deals as well as on pricing,” Michael said. “There’s no question that higher rates and the specter of higher rates will more likely than not push the price of deals down.”
However, Michael explains that he doesn’t expect the higher rates to change the design of most transactions and instead expects buyers to lean into rollover equity. Additionally, he stressed that when higher rates impact deals, price should not be the deciding factor for any prospective buyer or seller.
“At the end of the day, the most important thing for all of these people is to pick the right partner,” Michael said. “If they sell to or partner with the wrong firm and it’s a bad fit for both sides, they’re in trouble regardless of the multiple and terms.”
