July was the strongest month on record for mergers and acquisitions of wealth management firms, according to data released by Fidelity Institutional.
Nineteen RIA firms with a collective $29.6 billion in assets were involved in deals last month, along with one broker-dealer with $6.5 billion in AUM. The number of deals was up 19% from the previous month and 46% more than in July 2022, while the amount of assets increased 32% from June and 43% year-over-year.
The largest deal of the month was Pathstone’s acquisition of Veritable, a $17 billion multifamily office firm, from Affiliated Managers Group.
Strategic acquirers executed 82% of the assets and continue to report healthy pipelines, while private equity fueled all but three of the transactions, said Laura Delaney, Fidelity’s vice president of practice management and consulting.
“Although strategic acquirers continue to execute the majority of transactions in this competitive landscape, we continue to see a handful of first-time acquirers breaking through, which points to the health of the RIA M&A marketplace,” Delaney said in a statement.
However, it’s too early to tell if the record-breaking July is an anomaly or an indication that the recent slowdown in M&A — caused by the increase in the Fed's target rate — is truly over. Most of the deals were front-loaded into the first half of July, with just a single transaction occurring after July 19. These deals take an average of seven months to complete, meaning most, if not all, of these transaction began negotiations in 2022, Delaney said.
“August’s activity, which is yet to be seen, should be a good litmus test as to whether we may start to see an activity pull-back due to the 2023 interest rate environment,” she said.
While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.
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