Near-record pace of M&A continues for RIA firms

While slower than the torrid pace of consolidation in the first quarter, a near-record 38 RIA firm deals took place in the second quarter, according to the latest report from DeVoe & Co.

The April-through-June total of mergers and acquisitions among registered investment advisers was the third-busiest quarter since the start of 2013 and the fifth consecutive quarter of 35 or more transactions. A record 44 M&A deals took place in this year’s first quarter, followed by 39 deals in the first quarter of 2015.

The first six months of 2017 resulted in 82 transactions, a 15% increase over the 71 deals in the same period a year ago.

“Mega-deals were back in the second quarter, pushing the AUM transacted to the rarified air of over $100 billion in a three-month period. Three $5 billion-plus AUM transactions, virtually matching the number executed during the same period in 2016,” the report noted.

Excluding the three giant transactions, the average size of acquired RIAs dropped more than 30% during the first half of 2017. After a steady increase over the last four years to exceed $1B, the average AUM decreased to $698 million, the report said. The steep drop was driven by a spike in transactions in the $100 million to $250 million range during the first six months and a similar decline in transactions in the $1 billion to $5 billion range.

The report noted a shift in the composition of firm buyers, as banks “sustained their newfound interest in acquisitions, and RIAs moved toward the sidelines.”

“We’re tracking toward yet another record year of M&A for RIAs,” said David DeVoe, the firm’s managing director. Last year, 145 deals took place.