RIA M&A activity sails strong into 2024, Echelon says

A report released by Echelon Tuesday forecasts M&A activity will be flying high well into 2024.

Echelon’s RIA M&A Deal Report found that the average assets per transaction experienced at 3.9% year-over-year growth. This was propelled by the success of several transactions, which reached as high as $20 billion, achieving the second highest annual total ever recorded, down from 2022.

“Another driver of deal size was the heightened creativity in deal structures, adopted by private equity firms seeking to get deals across the finish line in the face of higher borrowing costs,” the report said. “Structured minority investments, with features such as paid-in-kind and preferred distribution rights, have become more popular with buyers seeking to pursue deals in an environment that has seen LBOs more difficult to complete.”

That’s not to say all was at its highest. There were 321 announced transactions in 2023, a small decline – 5.9 percent - from 2022’s record total of 340 deals. This can be blamed on the high borrowing costs as the federal funds rate surged to more than 20 times its March 2022 level, peaking at 5.50 percent last July. With the pace of 2022 and 2023 transactions keeping steady at well over 300, the industry is in excellent shape.

“2023 was another year where annual deal volume eclipsed the 300-mark first achieved in 2021,” Echelon said in a statement. “The number of annual wealth management transactions has grown at a 5-year CAGR of 12.1% between 2018 and 2023.”

Private equity investors continued to dominate the wealth management deals in 2023. In particular, private equity-backed strategics executing programmatic acquisition campaigns maintained their position as the industry's most active acquirers last year, participating in 71% of transactions and accumulating assets worth over $466 billion.

Based on assets, the key transactions of 2023 involved Captrust and Cetera Financial Group. “Among the noteworthy deals is Cetera's acquisition of Avantax, an all-cash transaction valued at approximately $1.2 billion,” Echelon said. “This transaction enhances Cetera's succession planning capabilities for advisors and expands its existing tax and wealth management offerings.”

Wealth Enhancement Group and Mercer Advisors maintain their lead as major players for M&A activity, with 16 and 11 deals, respectively. Savant Capital Management found its way onto the list for the first time, completing nine transactions with a total of $8.5 billion in assets.