Schwab Advisor Services’ (SAS) quarterly report tracking industry-wide RIA mergers and acquisitions showed that M&A activity was flat in the second quarter and first half of 2012, but the average size of the deals has increased, and what Schwab calls “national acquiring firms” are dominating the RIA acquisition marketplace. The company, as part of its Schwab Transition Services initiative, tracks RIA firms that primarily serve HNW clients and that have a minimum of $50 million in assets under management, as well as breakaway brokers from wirehouses “who received consideration” for joining an independent RIA firm.
On Thursday, Schwab said that for the quarter and first half ended June 30, there were eight and 25 completed deals, respectively. The total size of the acquisitions in the period were $12.3 billion as measured by AUM in the second quarter, and $36.2 billion for the first half of 2012. The average size of the deals as measured by AUM of the acquired or merged firm was $1.62 in the second quarter and $1.4 billion in the first half.
Schwab reported that those ‘national acquiring firms,’ commonly known as rollup firms or aggregators (though those firms dislike both names), accounted for three of the eight deals in the quarter, and about 50% of total deals since the fourth quarter of 2011.
“RIA M&A deal flow has remained steady during the first half of 2012, recording just slightly fewer transactions than the same period last year,” said Jon Beatty (right), senior vice president, sales and relationship management for SAS, in a statement. “While the second quarter slowed a bit in terms of the number of completed transactions, we’ve seen a big jump in the average deal size so far this year, indicating the overall strength of the RIA segment.”
In an interview with AdvisorOne on July 17 prompted by the release of Schwab’s 2012 RIA benchmarking study, Schwab’s Beatty pointed out that the majority of advisors in the study said their top initiative in 2012 was firm growth. Also, the study found that the more than 1,000 RIA respondents reported record revenues and asset levels last year, thanks to the addition of new clients and rising client retention rates.