RIA M&A sets another record in 2018

Consolidators continue to gobble up independent firms

Jan 14, 2019 @ 1:04 pm

By Jeff Benjamin

The financial market volatility that picked up in earnest last year was not enough to derail the pace of consolidation among registered investment advisers.

Echelon Partners reported Monday that merger and acquisition activity in the RIA space posted its sixth straight year of record growth in 2018.

There were 181 deals last year, 13 more than the record set in 2017. The full-year deal count was more than double the 90 acquisitions tracked by Echelon in 2013, when it began tracking this kind of activity.

The quarterly pace of deal activity was steadier than in prior years, including 44 deals in the fourth quarter, which marked the best final quarter of the year since 2013.

Last year also marked another milestone: There were more than 40 deals in each quarter, including 43 in the third, 48 in the second and 46 in the first quarter.

The average deal size of $1.3 billion last year was also a record and was up 31% from the average deal size in 2017. Last year also marked the third consecutive year with an average deal size above the $1 billion mark.

In terms of the acquiring firms, strategic buyers and consolidators were responsible for 47% of the activity, followed by RIAs at 28%.

Over the past five years, the trend has seen consolidators make up a larger share of deals, while the RIA share has declined. RIAs peaked in 2013, when they made up 47% of buyers, while consolidators made up 31%.

Breakaway broker activity also continues to trend higher, according to Echelon.

The 147 breakaways in the fourth quarter was the highest level since the outlier of the second quarter of 2016, when 176 brokers left wirehouses for the RIA channel.

The fourth-quarter breakaway activity represents a 35% spike above the historic average for breakaway activity and followed 139 moves in the third quarter, Echelon reported.

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