Average Size of Advisor M&A Deal Jumps in Q2: Schwab

The 12 M&A deals in the second quarter of 2011 represented $13.2 billion in AUM, Schwab says

Newly released data from Charles Schwab Advisor Services of industry-wide mergers and acquisition activity among registered investment advisors (RIAs) for the first half of 2011 reveals a significant jump in the average deal size.   

According to the Schwab data, released Wednesday, there were 27 M&A transactions involving RIAs in the first half of this year, representing approximately $20.8 billion in total assets under management (AUM) acquired in the first two quarters.

The AUM for the average deal during the first half of 2011 was $770 million. In contrast, the first half of 2010 yielded 30 transactions representing $12.4 billion in AUM, with an average AUM per deal of $412 million.

“Thus far in 2011, we’ve seen a significant leap in the average deal size due to a greater proportion of those with $1billion or more in AUM, despite a slight decrease in transactions over the same period last year,“ said David DeVoe, managing director of strategic business development for Schwab Advisor Services, in announcing the M&A results.

According to Schwab, the 12 M&A deals in the second quarter of 2011 represented $13.2 billion in AUM and represented a decrease in deals from the 14 deals with approximately $8 billion in AUM reported in the same quarter in 2010. The 12 deals tracked by Schwab in Q2 of this year had an average deal size of $1.1 billion, versus $571 million in Q2 of 2010. The dominant buyer category continues to be RIAs, Schwab says, which conducted 12 transactions in 2011.

“RIAs continue to be the dominant buyer category, demonstrating their growing sophistication in mergers and acquisitions,” said DeVoe. “It also shows RIAs’ willingness to use M&A as one way to achieve business goals and objectives.”

In Q2 2011, Schwab issued M&A data based on an updated methodology that provides a tighter focus on RIAs who directly serve the high net worth client segment and removes institutional RIAs.

Going forward, Schwab’s M&A data will focus on:

  • Firms that predominantly serve high net worth retail investors;
  • Firms with at least $50 million in AUM;
  • Breakaway brokers from wirehouses who received consideration for joining an RIA.
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