RIA mergers and acquisitions continue at a fervent pace, according to DeVoe & Co.’s latest Deal Book report. There were 82 transactions in the first six months of 2017 vs. 71 in the same period of 2016.
At the same time, though, there were some surprises on the downside. For instance, the number of deals in the second quarter fell to 38 from 44 in Q2’17.
Plus, banks started gobbling up RIAs, with RIA buyers dropping from 29% of acquirers to “an alarming low of 22%” in the first six months of 2017, which is “a surprising development given the number of RIAs who have capital and are focused on acquiring,” said David DeVoe, managing director of the company, whi works with Nuveen to publish and distribute the findings.
Deal Size Downtrend
Perhaps even more significant, the average size of acquired established RIAs (excluding firms with over $5 billion in assets) fell more than 30% during the first half of 2017.
“After a steady increase over the last four years to exceed $1 billion, the average AUM decreased nearly $400 million to $698 million,” according to the latest Deal Book report. “The steep drop was driven by a spike in $100 [million] to $250 million transactions during the first six months — and a similar decline in $1 billion to $5 billion transactions.”
The industry gas seen “an interesting shift” in the makeup of buyers. Banks are showing a “newfound interest in acquisitions, and RIAs moved toward the sidelines” in the first half of the year.
First Republic, for instance, continued to acquire “aggressively” and added two new teams. Meanwhile, three other banks also bought RIAs, as did industry consolidators.
The ranks of consolidators though has been thinning “substantially,” according to DeVoe. Some have been sold (Washington Wealth and WealthTrust), changed business models (NFP and Boston Private) or gone bankrupt (iProOne and Mesa).