Aggregator aid? Size of RIA deals up dramatically
Average transaction AUM nearly double that of 2011, Schwab data show
Aggregators have become the biggest buyers of RIA firms this year, accounting for 48% of the transactions in the first half of 2012, up from 30% through all of last year, according to Schwab Advisor Services.
RIAs buying other RIAs accounted for 28% of the deals in the first half, down from 44% last year.
Schwab recorded 25 transactions representing $36.2 billion in assets over the first six months of 2012. Last year, a total of 57 deals with $43.9 billion at stake were announced.
The Schwab M&A data tracks transactions involving retail investment advisory firms with at least $50 million in assets, and breakaways who received consideration for joining an RIA.
According to the database, the average size of deals this year is markedly higher. The average transaction involved $1.45 billion in assets under management, up from an average of $798 million last year.
The national acquirers like HighTower Advisors LLC, Focus Financial Partners LLC and United Capital Financial Partners Inc. have been aggressively recruiting partner firms, which receive cash in exchange for giving a stake to the aggregator.
Jon Beatty, senior vice president of sales at Schwab Advisor Services, expects aggregator activity to continue. “It speaks to what’s going on with advisers’ going independent” with the help of larger partners, he said.
In March, for example, HighTower landed HSW Advisors, with $1.4 billion in assets, from the Merrill Lynch Private Banking and Investment Group. In January, the firm picked up the $2.5 billion team run by James Pupillo, formerly with MSSB.
In May, a Focus Financial-affiliated firm, The Colony Group LLC, bought Mintz Levin Financial Advisors LLC, with more than $1 billion in client assets.
Merger and acquisition activity has not returned to 2007 levels, which saw 56 transactions involving nearly $91 billion in assets. Activity rebounded a bit in 2010, with 70 deals announced, but fell to 57 transactions in 2011.
“It’s hard to believe this activity will take off without some tailwind” from the economy or the markets, Mr. Beatty said.
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