RIA mergers could be headed for another record in 2016

Last year's 123 deals exceeded previous annual record in 2014 by 37%

Feb 25, 2016 @ 6:45 am

By Christine Idzelis

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Dealmaking among independent financial planners is poised to pick up this year after record merger activity in 2015, according to consulting firm DeVoe & Co.

The registered investment advisory industry saw an unprecedented 123 acquisitions last year, exceeding by 37% the previous record set in 2014, according to a DeVoe report expected to be released today. That's more than double the 58 deals done in 2013.

M&A momentum may accelerate through market volatility after last year's “stock market roller coaster” failed to dampen a surge in “mega-deals” by firms with at least $5 billion of assets, according to the report. While advisers are seeking to join forces to combat new entrants and reduce compliance costs, an increasing number of RIAs are coming up for sale because their owners are nearing retirement.

(Related: 10 ways to get the best price when selling your firm)

“In many cases, they simply can't sell internally” when their firms reach $5 billion of assets as it “becomes impossible for the junior employees to buy you out,” said David DeVoe, founder of the namesake financial services consulting firm.

He said that banks and private-equity firms are potential buyers in the market after swooping into the “ground swell of M&A activity” last year with “some conviction.”

There were 13 mega-deals in 2015, jumping from just two the previous year, according to the report.

RIAs that sold their businesses last year had an average $855 million of assets under management, rising from $691 million in 2014, according to the report, which tracked deals of at least $100 million. Seasoned acquirers dominated the market in 2015, with 89% having made acquisitions in the past.

Mariner Wealth Advisors, Aspiriant and Buckingham Asset Management have been particularly acquisitive, “blurring the line” between RIA and “consolidator,” according to the report.

Top 5 mega deals in the RIA industry in 2015
Seller AUM ($B) Buyer
City National / Convergent and others 33 Royal Bank of Canada
Edelman Financial 14.4 Hellman & Friedman
The Mutual Fund Store 9.8 Financial Engines
myCIO 7.0 AMG Wealth Partners
NorthStar Financial / CLS Investments 6.2 TA Associates
Source: DeVoe & Co.

Aspiriant, a Los Angeles-based independent wealth manager with more than $9 billion of assets, said this month that it was buying Glowacki Group, a Los Angeles firm managing $360 million of assets for high-net worth individuals, families and businesses. The deal followed Aspirant's merger with San Diego-based Hokanson Associates at the end of last year.

The biggest deal, so far this year in the highly fragmented RIA market is Kovitz Investment Group's move to join consolidator Focus Financial Partners, according to Mr. DeVoe, who pegged Chicago-based Kovitz at $3.1 billion of assets.

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