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RIA-to-RIA Deals Dominate in 2013: Pershing Advisor Solutions

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(click to enlarge) Pershing Advisor Solutions’ midyear M&A updateRegistered investment advisors are the busiest participants in the mergers and acquisitions arena so far in 2013, Pershing Advisor Solutions says in its latest report.

Despite unfavorable dealmaking conditions, most deals so far in 2013 have consisted of an RIA entering into a “one-off” transaction with another RIA or an RIA making a series of acquisitions, Pershing says in its updated M&A report, finding that RIA-to-RIA deals were 60% more likely this year.

Pershing Advisor Solutions’ midyear M&A update, released on Monday, reinforces trends last described in its Real Deals Trend Report: The Powerful Potential of the RIA to RIA Deal, which analyzes dealmaking activity among RIAs during the first half of 2013.

The updated findings indicate that confidence is returning to both investors and RIAs, with a significant increase in RIA-to-RIA deals despite pessimistic conditions. These RIA-to-RIA deals were typically driven by a desire to gain one of four strategic objectives, according to the report:

  1. Achieve economies of scale
  2. Access a new geographic or segment market
  3. Bring in new skills and experience, or
  4. Enable a succession in ownership.

“The confidence of RIA owners to make additional investments within their industry continues to grow, despite more tepid interest from outside investors,” Pershing said in its midyear update. “This year, chances have been almost 60% greater that an RIA deal will involve another advisory firm. Thus far in 2013, transactions among advisory firm owners accounted for 58% of all RIA deal activity, which is up sharply from 37% of deals through all of 2012.”

Following a flurry of activity at the end of 2012, the first half of 2013 saw only a moderate number of deals and assets exchanged, and with a few noteworthy exceptions, the deals involved smaller firms, Pershing reported. Twelve transactions targeted retail-focused RIAs with at least $50 million in assets under management (AUM) or $500,000 in annual revenues. The six-month total was three fewer transactions than occurred in the fourth quarter of 2012, when deals were rushed to completion in anticipation of more favorable tax treatment prior to potential rule changes in 2013.

The level of recent activity registered a slight increase as a result of one large second-quarter transaction: the purchase of Atlantic Trust Private Wealth Management, comprising more than two-thirds of the total first half of the year’s assets. CIBC, the Canadian financial institution, announced in April that it would acquire Atlantic Trust for $210 million in an all-cash transaction.

But overall, the first half of 2013 continued the RIA-to-RIA trend.

“As advisory firms initiate a larger share of deals, the other buyer types have significantly decreased in activity in 2013,” according to the report. “Serial acquirers accounted for only 25% of deals in the first half of the year, down from 32% of deals in the second half of 2012. Bank and trust firms have also slowed their RIA acquisitions, with only one purchase made in the entire first half of 2013.”

Recent noteworthy RIA-to-RIA deals cited in the Pershing report included: Highland Capital Management’s January merger with wealth manager Argent Financial Group, bringing total combined assets to about $4 billion; Exencial Wealth Advisors’ January acquisition of $190 million RIA Investors Asset Management; Atlanta Capital Group’s January purchase of $141 million in assets managed by RIA Optimum Growth Advisors; and Banyan Partners’ June purchase of RIA Silver Bridge Advisors, which added $1.9 billion in AUM.

Read Pershing’s Collaborative Culture and CEO DeCicco’s Priorities from Insite 2013 at ThinkAdvisor.


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