Mergers and acquisitions in the RIA space are on track to set another annual record, but the exact number of deals done year to date is open to interpretation.
Echelon Partners reports there were 43 “consummated transactions” for the third quarter, bringing the total year-to-date number to 137. DeVoe & Co. is reporting 40 deals for Q3 and a year-to-date total of 123.
Both firms operate as investment bankers and consultants to RIA firms and neither publishes a complete list, so it’s difficult to understand why their deal totals differ so widely, especially because both include only deals involving domestic firms with assets under management of $100 million or more.
Still, both firms agree that by year end the total number of M&A deals will exceed last year’s totals — 168 for Echelon Partners and 147 for DeVoe & Co. Echelon is forecasting 183 deals by year-end. DeVoe & Co. doesn’t forecast a number but doesn’t expect a blockbuster year.
The third quarter of 2018 included some very big deals in the RIA space, among them Focus Financial’s acquisitions of Loring Ward ($17 billion in AUM) and Edge Capital Group ($3.5 billion in AUM) following the consolidator’s IPO in July and Fifth Third Bank’s acquisition of Franklin Street Partners ($2.2 billion in AUM).
The average deal size topped $1.5 billion, according to Echelon, which includes Genstar Capital’s majority stake of the Cetera Financial Group, which has $224.5 billion in AUM, in its tally. That deal was valued at about $1.7 billion, according to Bloomberg.
DeVoe & Co., which excludes Genstar’s Cetera deal from its count because Cetera is an independent broker-dealer rather than an RIA, has the average deal size at just under $1 billion.
Both firms, however, agree that $1 billion-plus AUM firms are not the only desired targets.
Strategic buyers and consolidators remained the biggest acquirers of RIA firms, but private equity, which also has stakes in some strategic buyers and consolidators, was also a factor as well as banks, which seem to be making a small comeback into a market they once dominated.
The sellers included firms whose owners are nearing retirement and want to slow down but stay in the business for several more years and firms with younger owners, often midsize with assets under $1 billion, who want to scale up.