The registered investment advisory space reported 61 M&A deals during the second quarter, up from 65 sequentially and up from 57 in the year-ago period, an unusually slow period, according to DeVoe & Company's Recent Deal Book. During the first half of this year, there were 126 transactions in the space, up 5% from a year ago, a sign of a steady but healthy M&A market.
“For nearly three years, the number of quarterly transactions has consistently hovered around 65. While this volume continues to exceed each quarter through 2022, M&A activity in the RIA industry has now remained at a stable plateau for an extended period of time. ” the report said.
A number of new buyers have come into the space recently, with 83 firms announcing deals during the first half of this year, up 26% from the first half of 2023. Kovitz Investment Group AND Colony group, which are hub firms owned by Focus Financial Partners, were listed for the first time on the list of most active buyers (three or more transactions). Other newcomers to the list included AlTi Tiedemann Global and Modern Wealth Management.
“All have received some form of outside capital in support of inorganic growth, illustrating the growing influence of investors in the RIA M&A landscape,” DeVoe's report said.
Overall, 2024 is on track for a slight increase in M&A from 2023. Market, economic, or political developments could affect the growth trajectory of RIA M&A in 2025, the report warns.
Smaller sellers have represented roughly half of all deals done in five of the past seven years, but activity among small RIAs is declining as the average deal size is increasing.
Year-to-date, mega-firms with over $5 billion in AUM accounted for 15% of all transactions, up from 12% in 2023 and 6% in 2022. Meanwhile, sellers with $100 million to $500 million in assets lost 4% of share the market with medium-sized firms. Mid-sized sellers ($501 million to $1 billion) were 18% of all deals in the first and second quarters of 2024, up from 13% in the second quarter of 2023 and 14% at the end of 2023.
“Mid-sized vendors are becoming more attractive to buyers, as they often sell at a discount to large retailers and mega-vendors, are relatively easy to integrate, and can offer a medium-sized office in a new market, ” says the report.
Acquisition of Beacon Pointe Advisors in June of Joslin Capital Advisors, an RIA with $775 million in client assets, is one example.