RIA firms see record number of M&A deals in first nine months of 2016

The sale of large advisory firms with $1 billion to $5 billion is surging, says DeVoe & Co.

Oct 24, 2016 @ 7:00 am

By Christine Idzelis

Deal making in the registered investment advisory industry reached a new record this year as the pace of mergers and acquisitions remained elevated in the third quarter.

There were 109 M&A deals through September, up from 100 during the first nine month of 2015, according to research firm DeVoe & Co. The third quarter saw 37 transactions, compared with 30 in the same period a year ago.

This year's surge in the sale of large RIAs firms, or those with $1 billion to $5 billion of assets, continued to drive activity. They tend to have established brands and infrastructure, as well as attractive profit margins, yet are still within reach of buyers who can't afford the mega-deals, according to David DeVoe, the research firm's founder.

“Clearly, they're extremely attractive candidates for acquirers” as they're propelling M&A, Mr. DeVoe said. “We're up about 10% over last year, which was the all time high-water mark for the industry.”

Large RIA firms were sold in 24 deals this year, up from 17 in all of 2015 and just 9 in 2014, according to DeVoe & Co.'s latest quarterly M&A report.

So-called sub-acquisitions, or deals done by advisory firms owned by a larger parent, are also gaining momentum. There were 14 such purchases in the first nine months of this year, up from 12 in all of 2015 and five in 2014.

The activity has picked up as RIA firms under the ownership of aggregators such as Focus Financial Partners are making more of their own acquisitions, according to Mr. DeVoe, who said sub-acquisitions make up 14% of deals this year.

“It's going to become a more important dynamic for M&A,” he said.

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