RIA acquisitions on record pace, despite sometimes volatile markets

Echelon Partners is predicting M&A activity in RIA space will be up 11% in 2019

Jul 8, 2019 @ 4:35 pm

By Jeff Benjamin

The pace of consolidation in the registered investment advisory space hit a record in the second quarter and puts the industry on pace for its seventh-straight recording-setting year, according to consulting firm Echelon Partners.

The 52 RIA acquisitions during the three-month period from April through June compares with 49 deals in the first quarter of the year, and 44 during the same quarter last year.

In addition to increased volume, the second quarter also saw 15 deals involving more than $1 billion, and it was all happening at a time of growing economic uncertainty.

"Dealmakers continued their heightened activity despite volatility in capital markets during the quarter," the report stated. "The ongoing trade war between the U.S. and China caused investor angst in May, and volatility returned to levels not seen since the end of 2018 with the VIX Index spiking over 60% during the month."

But even against that economic backdrop, the S&P 500 Index gained 6.9% in June for its best June since 1955.

The average assets under management per RIA acquisition in the second half came in at $1.01 billion, which puts 2019 on track for a fourth-straight year of $1 billion-plus average deal size, although it is down slightly from last year's average of $1.26 billion.

"The declining average AUM supports a key trend of 2019: record deal volume is being driven by smaller firms," the report states. "RIA-to-RIA deals dominate the lower AUM part of the market, but we are also observing increased volume of mid to small-sized transactions being completed by strategic [buyers] and consolidators."

Echelon is now projecting that a record 202 RIA acquisitions will be completed in 2019, reflecting an 11% increase over the 181 deals recorded last year.

Over the first six months of the year, RIAs made up 35% of buyers, which is the highest percentage since 2012 when RIAs made up 31% of buyers.

While RIAs gained ground as buyers, strategic buyers and consolidators dropped a bit to represent 38% of buyers during the first half, down from 47% last year.

On the breakaway broker front, the number of brokers exiting the wirehouses rebounded sharply during the quarter to 192, which was more than double the 94 breakaways recorded by Echelon during the first quarter.

"The second quarter's rebound puts 2019 on pace for a record 572 breakaways, 6.5% higher than 2018, the next highest year," the report states.

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