RIA consolidation on track for another record year, Echelon reports

Three straight quarters of declining deal volume doesn't derail the bigger M&A trend in wealth management.

Two consecutive quarters of declining merger and acquisition activity involving wealth management firms isn’t enough to derail the longer-term trend of widespread consolidation across the financial planning industry, according to the latest data from Echelon Partners.

There were 87 deals announced during the second quarter, down from 94 deals in the first quarter and 99 in the fourth quarter of last year. But that total of 87 deals still ranks as the third highest on record, according to Echelon.

Recent periods with deal volume close to the 87 deals in the second quarter include the third quarter of last year, with 78 deals, and the first quarter of last year, with 76 deals.

Even though the trend is slightly downward, the 181 deals in the first half of 2022 compares to 130 announced deals during the same period last year, a 39% increase.

Echelon is projecting a full-year total of 308 deals, which would beat last year’s record 307 deals. If the forecast is correct, 2022 would be the 10^th consecutive year of record deal volume.

Part of the reason the M&A tracker is so bullish on the pace of deals increasing is that so much of the momentum is coming from large strategic acquirers, which have the deep pockets to continue their buying sprees. Such buyers include Creative Planning, which has announced 12 deals this year, Mercer Advisors, which has announced 10 deals, and Beacon Pointe Advisors with eight deals.

So far this year, 46% of deals involved strategic buyers, which compares to 48% for all of last year, and 32% for all of 2020.

The resilience of the M&A is most impressive when considered against the backdrop of the broader economic and financial markets environment, including inflation at a 40-year high, an increasingly hawkish Federal Reserve, and a stock market that’s been in bear market territory for much of the year.