Despite another record quarter for RIA consolidation, M&A tracker DeVoe & Co. claims the pace of deal activity is in the final stage of the post-Covid surge.
The record-setting 58 deals announced in the first three months of 2021 followed a record 159 transactions in 2020, including 48 in the fourth quarter, but managing partner David DeVoe said the 33 deals in January suggests a peak for the pandemic-induced momentum.
“The surge crescendoed in January, driven by the combination of a spike in mid-sized seller activity and continued momentum of larger sellers,” he said.
The data show firms managing between $500 million and $1 billion represented 26% of the first-quarter deals, up from 17% during the same period last year.
DeVoe’s four phases of post-Covid RIA merger and acquisition activity includes the normal activity during the start of last year when the full impact of the pandemic was still unknown, followed by the second phase of a lull in deal volume, followed by the surge stage that is now winding down.
The final stage of RIA consolidation will be a return to normal deal volume, DeVoe said.
For context on the deal surge, consider that the first quarter of 2021 marked the first time deal volume exceeded 50 transactions, which occurred just two quarters after deal volume crested the 40-transaction milestone in the third quarter of last year.
After the January peak, deal volume returned to historically normal levels of 12 deals in February and 13 in March, DeVoe said. “The tide receded,” he added. “The post-Covid surge is officially over.”
According to the report on first-quarter activity, “The industry had burned through the excess fuel generated by the impact of Covid, and RIA M&A has now coasted for two months.”
The 13 deals in March matched July 2020 levels when the transactions were pulling out of a lull that saw just 34 deals during the four-month period from February through May of last year. DeVoe describes the fourth phase as a return to normalcy and a “milder, though sustained, upward curve lasting for at least another five to seven years.”
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