With dealmaking in the wealth management industry rebounding in 2024 after a slightly down 2023, this year’s marketplace looks attractive for sellers, particularly with firms that can tout profitability, growth, experienced management teams, and a deep bench of talented financial advisors, according to Echelon Partners.
After a record 366 wealth management deals were announced last year, competition for acquisitions is likely to intensify as new buyers of registered investment advisors become more active, according to Echelon Partners, a boutique investment bank focused on mergers and succession planning in the wealth and investment management industries, which released on Tuesday morning a brief of its 2024 RIA M&A Deal Report.
“2024 saw 14 new buyers enter the marketplace, an uptick of 10 percent relative to the number of new entrants in 2023,” the report read. “With a larger quantity of buyers competing in the marketplace, we are likely to see a rise in valuation and further flexibility in deal structure and solutions.”
“Despite the flurry of M&A activity, the RIA market remains fragmented, with the total number of RIAs growing by 18 percent since 2019, creating an attractive consolidation opportunity for investors,” Echelon stated.
Notable transactions last year included some of the largest names in the financial advice business, including CI Financial, Creative Planning, and Fisher Investments.
And private equity money is contributing to the good times for RIA owners who want to sell their businesses, one veteran industry executive said.
“The start of this year feels very much like 12 months ago; the large, private equity funded consolidators are continuing to buy smaller firms and fold them in,” said Larry Roth, managing partner at RLR Strategic Partners. “For RIAs, the consolidators want to continue to buy firms, while on the independent broker-dealer side of the business more BDs wat to buy branch offices or advisors’ practices who are already affiliated with the firm.”
According to Echelon’s report, wealth management transactions increased 14 percent compared to 2023, which saw 321 deals. Before 2024, the recent peak in wealth management dealmaking was 2022, when 340 transactions were announced.
And private equity managers will continue to dominate the wealth management M&A market, according to Echelon.
The better macroeconomic backdrop compared to 2023 helped drive wealth management deal volume to its high, the company said, and private equity buyers drove the market.
“Private equity executed 50 direct investments this year, a 66.7 percent year-over-year increase from 2023, sowing the seeds for further M&A and tuck-in acquisitions,” the report noted. “Total private equity transactions, including direct investments and tuck-in acquisitions by portfolio companies, increased to 259 deals, a significant increase from the 199 transactions in 2023, highlighting private equity's growing dominance in M&A and its pivotal role in dealmaking.”
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