RIA M&As Notch Records for 2Q and 1H

Second-quarter mergers and acquisitions among registered investment advisors (RIA) rose to a record 38 transactions, one more than during the year-ago period, according to the DeVoe & Co. RIA Deal Book.

M&A transactions in the first half of 2017 rose 15 percent to a record 82 deals compared with the year-ago period, the industry tracker reported.

Assets under management (AUM) associated with the deals skyrocketed to $104 billion in the second quarter compared with $53 billion in the year-ago period as “mega-deals" returned, Deal Book noted.

“2017 is tracking toward yet another record year of M&A for RIAs,” said David DeVoe, managing director at DeVoe & Co. in San Francisco.

The supply of sellers will continue to increase over the next couple of years, he said.

With the average age of advisors in the upper 50s, many RIA founders and principals are thinking about exit strategies and retirement.

Leaving aside three deals with AUM of $5 billion or more, which skewed the AUM numbers, the average size of acquired RIAs dropped 30 percent to $698 million during the first half compared with the year-ago period, Deal Book reported.

The drop was driven by a spike in deals involving smaller transactions and a drop in deals in the $1 to $5 billion transaction range, Deal Book found.

Banks, RIA Consolidators Gain Market Share

Banks emerged as voracious acquirers in the first six months of the year and were responsible for 15 percent of the RIA acquisitions by the time June 30 rolled around.

By comparison, banks were responsible for only 3 percent of RIA acquisitions during 2016, the survey found.

“I actually expected the banks to enter sooner, so their new activity isn’t a surprise,” said DeVoe in an email.

Regardless of the Department of Labor’s new fiduciary rule, which is expected to spur growth of fee-based RIAs over the long term, RIAs and their upscale client base are attractive targets for banks to sell their products, he said.

RIA consolidators, companies that bill themselves as independent platforms and help RIAs grow by offering technology, compliance support and capital with which to expand, also increased their share of RIA acquisitions.

In the first six months, consolidators were responsible for 51 percent of RIA acquisitions, a rise of 7 percentage points from 2016, the survey found.

As consolidators have become more successful, they have reinvested in the business and hired more people to help source deals, in-turn attracting more RIAs.

“They essentially have more 'storefronts' to help capture a greater share of selling advisors as they (selling advisors) are gradually moving toward the transactions,” he said.

RIA Deal Book is sponsored by the asset manager Nuveen.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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