In RIA sales, the entity chart beats the multiple

The Bahnsen Group's deal with Hightower entered our deal log on Sept. 24 with no purchase price attached, and that blank is more instructive than a headline figure would have been, because the multiple that eventually gets attached to a transaction like this one is a pre-tax number. What a selling partner keeps turns on the entity the practice sells out of—a question settled at formation, long before a buyer calls.

The July 2025 law is why the entity decision has become an exit decision rather than a formation one: it made Section 199A permanent and widened the exclusion for qualified small business stock, moving real money into elections that founders made back when an election was a filing rather than a negotiation.

Those two provisions pull on opposite ends of the same question: permanence for 199A makes the pass-through deduction a fixed feature for as long as a practice operates in its current form, removing the reason a founder once had to convert to a corporation ahead of a sale back when the deduction looked like it would lapse, while the widened small-business exclusion raises the value of having issued qualifying stock early. Neither is something a seller can arrange in the last week of diligence.

Founders rarely reopen the entity question, since conversion carries its own costs and its own calendar and the case for making the change has been thin for years; the law raised the value of the decision without changing the habit of leaving it alone.

Put two founders side by side—same book, same earnings before owner compensation, same buyer, same offer on the table—and the first sells stock in a corporation whose shares qualify for the exclusion, so the owner-level capital gain on that stock is what the exclusion exists to spare, while the second sells the assets of a business taxed as a corporation, where the gain is taxed at the entity and again when the proceeds reach the shareholder. The offers are identical; the outcomes are not.

Most practices sit at neither extreme: a pass-through owner sells, pays once on the gain, and has no exclusion to reach for, so the distance between the best outcome and that one is an entire layer of tax—and the closing table is not where it gets closed.

The coverage of the Bahnsen announcement does not say which of those positions the firm occupies, and no price was attached—the two facts that decide what the partners net and the two facts no press release in this market reliably supplies.

DeVoe & Company's 19% dip in RIA deal volume is the cleanest illustration of how slowly this information travels, because the figure reads as a count of decisions rather than a statement about prices: a deal announced this month was set in motion a year earlier, making a soft quarter a reading on timing. The entity chart sits on the same shelf, set even earlier, and lags the price in the same way.

A soft quarter is not evidence of softer prices, since volume responds to owners' confidence and to the calendar of sellers who decide to test the market while entity structure moves when the tax code does—roughly once a decade and then not again. A seller who reads a slow quarter as a reason to wait is answering a question about entity structure with evidence about volume.

The entity question does more work than a tax footnote usually gets credit for: it is the reason two sellers with identical economics can bank different sums while the buyer books the same disciplined multiple in both.

The underlying trade is straightforward: a buyer purchasing assets generally gets to step up the basis of what it acquires, and a buyer that expects that step-up can pay more for the same book than one that cannot, so the seller's structure decides which of those two buyers the seller is actually talking to.

Buyers underwrite the years that follow the close—the book, the team, the concentration, the growth—while the entity chart is about the price paid at the close, the one input in the underwriting that neither side improves by working harder at it.

The practical part is sequencing: a letter of intent anchors everyone on a headline number, and once that anchor lands, every structural fact discovered on the seller's side reads as a price reduction, even when it is nothing more than an arithmetic fact about the seller's own return. The response is expensive but not complicated—model the after-tax proceeds of a stock sale and an asset sale before anyone puts a figure on paper, so the negotiation happens once, on numbers the seller actually keeps.

Consideration deserves the same treatment: an earn-out gets argued as a risk-sharing device, and that argument is real, but the earn-out is also part of the answer to when the seller's gain gets recognized, and the two halves of that discussion rarely get equal airtime. Where the buyer pays in its own equity rather than cash, the timing question gets heavier still, and what is new is the size of the spread between the best structure and the worst—models built on older assumptions will not show it.

The likely shift is upstream: a structure question that used to surface in diligence should now surface in the first meeting, because a buyer who knows the seller's entity chart early can price the deal once instead of repricing it, and a seller who has run his own after-tax arithmetic cannot be talked past it.

An adviser quoting a multiple without asking about the entity is quoting a number that will not survive the seller's tax return, because multiples measure enterprises while the seller's proceeds are a different figure, and the space between the two is where the entity chart lives.