RIA mergers and acquisitions continued to match the record pace of last year’s deals in the first half of 2016, according to DeVoe & Company’s Mid-Year 2016 RIA Deal Book. Dave DeVoe, the company’s managing partner, said in an interview that the 71 completed deals so far this year “could put us on track for a year that’s potentially at or exceeding what we saw in 2015,” when deals totaled 130. More tellingly, DeVoe said numbers in the Deal Book, sponsored by Nuveen, show “we’re starting to hit seven to eight record breaking quarters” in a row of M&A activity. “Now we’re wondering,” DeVoe mused, if the number of deals constitutes “the new normal.”

 It’s not only the number of deals that’s growing, but the size of RIA firms involved has also increased, DeVoe said. The average size of an acquired ‘Established RIA’—which accounted for 43 of the 71 deals in the first half, “broke through  the $1B AUM mark,” the report found (DeVoe’s calculations for those firms excludes RIAs with less than $100 million in AUM and more than $5 billion to eliminate the outliers from the average; the remaining 28 deals involved breakaway brokers joining RIA firms).

 The report says the increase in the average size of the selling firm — from $649 million in AUM in 2013 to $1.04 billion so far in 2016 — reflects not only the growing size of RIAs in general, “but more specifically of the appetite of deep-pocketed acquirers that are seeking greater scale in the transactions they execute.” Or as DeVoe said, the numbers reflect “heightened interest from deep-pocketed acquirers who want a bigger bang for their buck.”

As for who is buying RIA firms, DeVoe reported that “banks have re-emerged as acquirers,” particularly of the $1 billion-plus RIA firms, while private equity is also “bigger in the space.” These “blue-chip private equity firms,” says DeVoe, also acquire bigger advisory firms, since they “need to deploy tens of millions of dollars in their portfolios.”

RIA firms themselves are showing a bigger interest in merging with other firms “because scale is becoming more and more important,” particularly when it comes to complying with the regulators. “The [Securities and Exchange Commission],” says DeVoe, “is hiring more people to actually audit these firms.”

 Another big acquirer in the RIA space is HighTower Advisors, which DeVoe points out decided nine months ago to expand beyond its traditional breakaway broker focus to also look at acquiring RIA firms. HighTower has since acquired four RIA firms with almost $2 billion in total assets under management, with Beverly Hills-based Acacia Wealth and its $500 million in AUM being the most recent acquisition. The so-called rollup firms such as Focus Financial, Fiduciary Network and Genstar Capital continue to acquire firms, often as “sub-acquisitions,” where a firm already acquired by the rollup firm then buys another firm, such as Buckingham Asset Management, which after being acquired by Focus has acquired three other RIA firms this year alone.

While succession planning continues to be a factor in RIA firm principals selling their firms, another trend driving the increase in deals is the increase in financing options, such as those offered by Live Oak Bank. Live Oak, says DeVoe, “has come on strong into the space, and rightly so” since the bank has the “ability to provide an efficient path” to dealmaking by using Small Business Administration loans. “For smaller and midsized deals they have been great,” DeVoe says, since their loans can “create a path to more creativity” in financing, “enabling more transactions.”

However, concludes DeVoe, “capital has not been constrained in this space.”

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