While consolidators continue to lead the way in acquisition activity in the wealth management space, the emerging story on the M&A front is the growing momentum involving sub-acquisitions, or deals by firms that themselves have been acquired by mega firms.
The latest report from DeVoe & Co. shows that registered investment advisers that have been acquired by other RIAs or consolidators are leveraging the resources of their acquirers to join the M&A game.
“The affiliates often use the parent company’s capital and/or M&A expertise to support their own inorganic growth,” said David DeVoe, founder and chief executive of DeVoe & Co.
DeVoe's report on deal activity during the first half shows that prior to the pandemic, sub-acquisitions steadily increased from 14% of all transactions in 2017 to 23% in 2020. The sub deals slowed during the early stages of Covid “as their parent companies concentrated on larger deals and affiliated sweet-spot targets were focused on supporting their clients through the pandemic,” DeVoe said.
But the volume has bounced back as smaller sellers have increased their activity, and 2022 is setting records for sub-acquisitions and is now on track for an annual record.
The 27 sub-acquisitions posted in the first half of this year represents a 170% increase from the 10 transactions during the first half of 2021.
The report cites Buckingham Strategic Wealth as “the perfect example of a successful sub-acquirer.” The $22.6 billion RIA, which is part of Focus Financial Partners, has completed more than 30 mergers.
While there were just 10 sub deals during the first half of last year, the number spiked to 30 during the second half. In 2020, sub-acquirers announced 18 deals in the first half and 19 in the second half.
“This surge in activity is part of the anticipated recent increase in small and midsize firm sales,” DeVoe said.
The average size of sub-acquisitions is roughly half the size of other transactions, contributing to the downshift in the average size of sellers in the first half of 2022.
The average asset base of sellers during the first half was $889 million, down from $1.2 billion for all of last year and $1 billion for all of 2020.
Two separate readings of American sentiment reflect worrying outlook
Quarterly refunding, economic data are in focus.
95% of his funds' holdings are in cash amid trade uncertainty.
Report shows trade wars has fueled inflows to funds.
Remaining competitive requires reduced vulnerability to external conditions
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
