Despite COVID, RIA deals headed for another record year

Deal tracker DeVoe expects M&A activity to climb 30% annually for at least five years

The third-quarter surge in merger and acquisition activity in the registered investment adviser space has deal tracker DeVoe & Co. predicting deal volume this year will exceed the record level set in 2019.

Despite the pandemic-influenced slowdown during the first and second quarters, the 20 deals at the 10-week point of the third quarter, compared to 14 over the same period last year, is a sign of a very big second half, said DeVoe founder and Chief Executive David DeVoe.

“The surge in transactions came faster than expected,” he said. “Many believed that the lull in post-COVID activity would last several quarters or longer, yet it only lasted three months.”

Since June, RIA M&A activity has been 59% higher than in 2019, and the volume in July and August is tracking at nearly two times the volume of March and April, DeVoe explained.

The deal slowdown, which saw March and April log just seven deals each, has since reversed with a vengeance, largely as a result of the momentum building for deals across the RIA space, DeVoe said.

This year through Wednesday, there have been 90 deals, which compares to 82 at the same point in 2019, which finished with a record 132 deals, marketing the sixth straight year of record volume.

DeVoe expects 2020 to finish with 140 deals. “While COVID-19 caused many RIAs to delay their M&A plans, most did not delay long.”

He believes the aging demographics of RIA owners, combined with the advantages of scale, will drive at least five years of 30% annual growth in M&A activity.

“Just like the underpinnings of the industry are not slowing down, a massive amount of this industry has just got to sell,” DeVoe said.

While deal activity has picked up from the lows seen in March and April, no month since has matched the 18 deals announced in January. But the May, June and July totals did climb steadily, with 10, 12 and 13 deals, respectively.