May 2, 2013

RIAs Closed 13 M&A Deals in Q1: Schwab Advisor Services

Pace of merger and acquisition activity was its most brisk since Q1 2012, but overall deal size declined

First-quarter 2013 saw the completion of 13 merger and acquisition deals totaling $5.8 billion in assets under management within the independent registered investment advisor segment, according to industrywide data compiled by Schwab Advisor Services and released Thursday.

Click to enlarge: Industrywide M&A Transactions: Schwab Advisor ServicesIt was the highest number of transactions recorded in the RIA sector since the first quarter of last year, when 17 deals closed, totaling $24 billion in AUM. Acquisition activity by RIAs increased in the quarter, with 54% of the total transactions closed by this buyer category.

However, overall deal size declined in the quarter for industrywide M&A transactions (see chart). Deal size for Q1 2013 averaged $447 million versus an average deal size of $1.3 billion for all of 2012, according to Schwab data.

Jon Beatty, Schwab Advisor Services“Though it’s still very early in the year, this quarter’s strong deal flow among RIAs is an indication that advisors are using M&A to increase the scale and footprint of their businesses,” said Jon Beatty (right), senior vice president of sales and relationship management for Schwab Advisor Services, in a statement. “Although we saw an increase in RIAs buying other RIAs in Q1, the overall deal size declined as we didn’t see a mega-deal like we saw in Q1 2012. We do, however, remain encouraged by the flows we have seen to date.”

He was referring to Affiliated Managers Group's purchase of a majority equity interest in Veritable LP, which was announced in March 2012.

National acquiring firms such as HighTower, Focus Financial and United Capital were the dominant buyers in 2012, finishing the year with 25 of the 45 total M&A deals, Schwab reported in January.

Strategic acquiring firms, which have recorded strong deal flow over the past year, were also a dominant buyer group in Q1, completing 38% of the total 13 transactions.

Schwab also reported that early findings from its 2013 RIA Benchmarking Study show that approximately 27% of RIAs are actively seeking to buy another RIA firm. For firms with $1 billion or more in assets, one-third are looking to make an acquisition.

“Given RIAs’ enthusiasm for mergers and acquisitions, coupled with the strong flows recorded to date, we believe there will be an increase in appetite for deals among RIAs moving forward if the economy improves and capital and liquidity becomes more accessible,” Beatty said.

Read RIA M&A Grew 30% in 2012, With Most Deals Done by Big Firms: Schwab at AdvisorOne.

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