RIA Mergers Begin 2018 With a Bang

RIAs have recovered the bounce in their M&A step.

First-quarter RIA mergers and acquisitions rocketed to a record 47 deals, bouncing back from 33 deals in the fourth quarter, according to DeVoe & Co.

Deals were up slightly from 46 in the first quarter of last year, DeVoe said.

Factors affecting this quarter’s numbers included:

• RIAs want to join larger firms for access to back office operations, more services and other benefits.
• Consolidators of RIAs remain the most active buyers while banks and private equity pulled back.
• Some analysts speculated RIAs would break away from their wirehouse or broker-dealer out of fear the wirehouse would leave the Broker Protocol, but that hasn’t happened.

“Overall, it is a good time to be a seller – and a buyer,” said Managing Director David DeVoe. “For sellers, RIA valuations are high, the number of candidates broad and there are clear benefits of scale. The bulk of the activity is around gaining scale."

While the bounce in the number of first-quarter deals was steep compared with the previous quarter, deal numbers are in-line with first-quarter averages, DeVoe said.

There were 152 transactions in 2017, DeVoe reported.

Looking Forward

The hunt for scale appears to be the main reason for RIA deals, but there are other reasons.

Some RIA owners want a deal to secure a succession plan so that an RIA principal can retire, DeVoe said.

Periods of extended market volatility, as investors and advisors have had to weather over the past three months, will sow the seeds of higher RIA sales as well, DeVoe said.

“Principals, many of whom are moving toward retirement, can become fatigued by the intensity and emotional engagement, while other experience greater fear that correction is pending,” DeVoe said.

“These shifts can lead to advisors who have been on the precipice of making a decision to sell to take action,” he said.

DeVoe sees RIA mergers and acquisitions accelerating over the next five to seven years as valuations remain high and the number of potential buyers also remains high.

“For buyers, RIAs are selling in record numbers and are genuinely curious about joining firms who can help them run better businesses,” he said. “As a result, RIA M&A activity is likely to continue to increase for many years to come.”

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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