Broker-dealer M&A shows signs of life in 2021

The acquisition market for broker-dealers looks like it is perking up as broker-dealer networks owned by private equity managers continue to hunt for assets. Year-to-date there have been four broker-dealer transactions totaling $65 billion in assets.

The breakneck pace of mergers and acquisitions by registered investment advisers and various large buyers, often called aggregators, has been grabbing headlines for the past few years.

But it turns out that broker-dealer M&A among broker-dealers has started 2021 with a good amount of activity after a “quiet” year in 2020, according to a report this week from Fidelity.

Indeed, the acquisition market for broker-dealers looks like it is perking up as broker-dealer networks owned by private equity managers continue to hunt for assets. Year-to-date there have been four broker-dealer transactions totaling $65 billion in assets, according to the report. For comparison, there were five deals totaling $72.5 billion in assets in all of last year.

The largest deal so far this year was private-equity-owned Cetera Financial Group’s agreement in February to purchase the $40 billion in wealth management assets from Voya Financial Advisors. Another private equity controlled broker-dealer network, Atria Wealth Solutions, in January said it was buying SCF Securities and its $4 billion in assets. Terms of those deals were not released.

Also in January, B. Riley Financial, Inc., a diversified financial services company, said it agreed to acquire the remaining 55% National Holdings Corp., an investment banking and retail broker-dealer with $18.9 billion in client assets, that it didn’t own already. The price was $3.25 for each share of National Holdings’ stock.

Finally, Arete Wealth in January said it was buying Center Street Securities, with close to $1 billion in retail assets. The terms of that deal were also not released.

The pace of broker-dealer M&A is far slower than RIAs, but total assets are comparable, according to the report.

Since the start of 2021, there have been 31 RIA deals representing $61.7 billion in client assets under management, according to Fidelity. For comparison, this surpassed the 20 transactions and $28.8 billion during the same period in 2020.