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Industry Spotlight > RIAs

RIA M&A Activity on Track to Hit a New Record: Schwab

By Emily Zulz

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The registered investment advisor industry is on track to set another record in mergers and acquisitions, according to a Schwab Advisor Services report released Tuesday.

“The RIA industry is off to a strong start in terms of M&A activity for 2016, building off a record year in 2015,” Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services, told ThinkAdvisor. “If this pace continues, we could set another record.”

Both the number of transactions and the total deal value are up in the first half of 2016, according to Schwab’s M&A research data, which reflects transactions involving primarily high-net-worth-and endowment-focused RIAs with assets under management exceeding $50 million.

Transaction volume reached 52 deals in the first half of 2016, which was a 41% increase from 37 deals in the first half of 2015, according to Schwab, and just two transactions short of both full-year 2013 and 2014 activity.

Total deal value in the first half of 2016 also reached a new high of $75 billion, up 50% from $50 billion in the first half of 2015. This also surpassed full-year values for nearly every year of the past decade.

In all of 2014, there were 54 total transactions with $43 billion AUM acquired. In 2013, the whole year saw a total 54 M&A transactions with $43 billion AUM acquired.

The first quarter of 2016 was an all-around standout quarter with 31 deals, 72% more than the 18 transactions in Q1 2015, and total deal value of $51 billion, a 122% surge from $23 billion in Q1 2015.

One of the key drivers in the first half of 2016’s M&A activity, according to Beatty, is the buyers.

“The universe of buyers continues to expand both in pure numbers and capabilities,” Beatty said. He added, “There’s many types of buyers to choose from and it’s multiple choice within those types.”

Of the buyers in the first half of the year, RIAs (35%) and strategic acquiring firms (31%) continued to dominate, together making up two-thirds of all buyers.

Meanwhile, private equity buyers continue to permeate the market. Private equity made up 26% of buyers in the first half of 2016, more than double the 11% in the first half of 2015, and topping private equity activity in any full year over the past decade.

As Beatty pointed out, a wider range of buyers has “created a plethora of choice for the seller.”

And, for those selling, Beatty explained that “the more options they have, the more likely they’re going to find something that meets” their concept.

Beatty called the transactions in the first half of the year “good news for the RIA industry.”

“We see M&A as a healthy component of a growing industry,” Beatty told ThinkAdvisor. “It’s there to solve business issues and create opportunities for firms. In some cases it can supercharge organic growth and allow firms to grow in multiple markets.”

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