RIAs seek to grow by gobbling up others

RIAs buying other RIAs will be a common theme over the next several years as firms look to grow via acquisition. The trick will be finding sellers who are not asking too much. One of the biggest shifts in the deal environment for registered investment advisers is large RIA firms becoming “serial buyers” of other RIAs, a trend that is expected to continue, according to Pershing Advisor Solutions LLC. Serial buyers are those completing three or more deals in a four-year period. In 2012, five of the 10 serial-buyer deals were initiated by an RIA, according to Pershing Advisor Solutions' annual Real Deals mergers-and-acquisitions report. “That's an uptick” from prior years, said Mark Tibergien, chief executive of Pershing Advisor Solutions. “In the distant past, serial buyers tended to be aggregators or banks. Now you see firms like Aspiriant [LLC] or Buckingham [Asset Management LLC], which are actively managed RIA firms that recognize an opportunity to grow through acquisitions.” Other examples of this “new breed of RIA serial buyer” include Banyan Partners LLC and Mariner Wealth Advisors, the report said. “We'll probably see greater activity over the next several years” from RIA buyers, Mr. Tibergien added. “Part of it will be for exit strategies, and part for growth strategies for those trying to get to a critical mass.”

MORE BUYERS THAN SELLERS

Mr. Tibergien said there are still more buyers looking for RIA firms than there are motivated sellers. “The big challenge for buyers is not to overpay,” he said. Overall, the report, released last Monday, said mergers and acquisitions involving RIA firms remained subdued last year as buyers and sellers held off in the face of an uncertain economy and fragile markets. In 2012, 35 transactions involving RIAs were completed, just two more than in 2011 and well shy of the record 68 deals done in 2007. Last year would have been even slower if not for a “flurry of fourth-quarter activity, likely driven by fear of less favorable tax treatment in subsequent years,” according to the report. “Few [players] have the confidence to follow through with a deal” while economic growth remains slow, the report said. RIA firms continue to play a larger role in the M&A space than banks, trust companies and aggregators, a trend that emerged in 2008. The RIA deals trend report is published by Pershing Advisor Solutions and produced by industry consultant FA Insight. The report tracks transactions of RIA firms with at least $50 million in assets under management or $500,000 in revenue.