A near-record quarter for RIA acquisitions

A near-record quarter for RIA acquisitions
Pursuit of scale combined with rising valuations is driving the sellers' market.
APR 26, 2019

The total of 31 acquisitions of registered investment advisers that occurred during the first quarter is just one shy of the record and signals more good news for those advisers looking to sell their firms. "I would call it a blockbuster quarter," said David DeVoe, managing director at the investment bank DeVoe & Co., which compiled the latest merger and acquisition data. While the pursuit of scale among registered investment advisers continues to be the primary driver for acquisitions, Mr. DeVoe said, rising valuations are also fueling increased activity. Because most advisory firms are valued based on some combination of total assets under management or advisement, the strength of the equity markets has been pushing valuations higher. Those higher valuations are moving more owners to the negotiating table to sell near the top or deploy a succession plan, Mr. DeVoe said. "Advisers are clearly more open to deals than they have been in the past," he said. Deal volume rose from 28 acquisitions in the fourth quarter of last year and 21 in the third quarter. Earlier last year, acquisitions had dropped to 16 in second quarter on the heels of the record 32 deals during the first quarter of last year. Mr. DeVoe does not anticipate the same kind of drop-off in volume this year because he is seeing a broadening in the types of firms that are acquiring RIAs. There has been an increase in so-called subacquisitions, which involves an acquisition by an RIA that is part of a larger aggregator. Subacquisitions now represent a quarter of all deals, according to the report. The byproduct of that increase in subacquisition deals is a lower average deal size because subacquisitions tend to focus on firms with between $100 million and $500 million under management. During the first quarter, for example, the average assets of firms acquired through subacquisitions was $423 million, which compares to $659 million for all other acquirers. "The volume and size of the subacquisitions is starting to drag down the overall averages," Mr. DeVoe said. "It's not a bad thing, it's just happening." During the first quarter, the average assets of RIA sellers totaled $609 million, which compares to $918 million for all of 2018, and $1 billion for all of 2017. RIAs represented 58% of the buyers during the first quarter, followed by consolidators at 32%. In 2018, RIAs made up 41% of the buyers, and consolidators were 40%. Other acquirers included banks.

Latest News

Musk, Ramaswamy tapped as advisors to dismantle government
Musk, Ramaswamy tapped as advisors to dismantle government

Vivek Ramaswamy, founder of asset manager Strive, and Tesla CEO Elon Musk represent incoming President Donald Trump's "Department of Government Efficiency," with possible consequences for agencies and regulations.

Could will-writing help close the racial wealth gap?
Could will-writing help close the racial wealth gap?

New research hints at the generational wealth-building benefits of writing wills for Black households that have historically lagged their White counterparts.

RIA consolidators are gobbling up market share: Cerulli
RIA consolidators are gobbling up market share: Cerulli

“The variety of consolidators drives competition, but it can make the market confusing,” one recruiter said.

Trump tariffs to spur inflation and slow growth, warns JPMorgan's Kelly
Trump tariffs to spur inflation and slow growth, warns JPMorgan's Kelly

Wall Street strategist argues aggressive tariff moves will create a "stagflation elixir" from countries exchanging economic blows.

Stigma a distant memory, securitized bonds are now an advisor's best friend
Stigma a distant memory, securitized bonds are now an advisor's best friend

Up from the ashes of the great financial crisis, securitized bonds are being added to more client portfolios.

SPONSORED Out with the old and in with the new: a 50% private markets portfolio

A great man died recently, but this did not make headlines. In fact, it barely even made the news. Maybe it’s because many have already mourned the departure of his greatest legacy: the 60/40 portfolio.

SPONSORED Destiny Wealth Partners: RIA Team of the Year shares keys to success

Discover the award-winning strategies behind Destiny Wealth Partners' client-centric approach.