Private equity drives another record quarter for RIA M&A

After a record-setting third quarter of 78 deals, Echelon Partners' data showed 2021 has already beaten last year's record for RIA transactions.

Wealth management industry consolidation continues to blow past quarterly records and is now on pace for 287 deals this year, according to the latest report from Echelon Partners.

The 78 deals announced during the three-month period through September compares to 55 deals during the same quarter in 2020, and is up from 54 deals during the second quarter of this year.

The 208 deals so far this year already surpassed last year’s record 205 deals, making 2021 the ninth consecutive year of record-setting consolidation among registered investment advisory firms.

Not only are there more deals, but the size of the deals is also ballooning. Through the first nine months of 2021, the average assets under management of target firms was $2.3 billion, which compares to $1.7 billion for all of 2020. In 2017, the average AUM of target companies was just slightly over $1 billion.

As the Echelon report explains, the growth in average AUM is also partly attributable to increases in investment performance. The S&P 500 Index is up 18.3% this year through Friday, which matches the full year performance of 2020, and compares to a 31.2% gain in 2019.

The Echelon report projects 2021 to finish with 136 transactions involving firms with more than $1 billion under management, which compares to 78 such deals in 2020, and just 29 as recently as 2017.

Private equity investors continue to be a major factor in the pace of consolidation, including 12 direct transactions during the third quarter. But the bulk of the PE influence is seen in the form of PE-backed consolidators like Mariner Wealth and Mercer Advisors aggressively buying up wealth management companies.

Some of the significant PE transactions during the quarter included Blackstone taking an 8% ownership stake in AIG Life and Retirement, Onex buying a minority stake in Wealth Enhancement Group, Bain Capital buying a piece of Carson Group, and Merchant Investment Management buying a stake in Concurrent Advisors.

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