RIA mergers and acquisitions continued to be strong overall for the first quarter of 2020 — though activity slowed in Q1 after a strong start, industry data show.
However, the economic slowdown due to the COVID-19 pandemic is expected to have a negative impact on this M&A activity at least in the near future, according to the latest M&A reports by DeVoe & Co., Echelon Partners and Fidelity.
These three firms don’t agree on what’s behind the slowdown seen in February and March, which came after January’s robust activity. In addition (and as usual), their respective M&A transaction data varied significantly as they each use different systems for including and excluding RIAs.
DeVoe & Co
DeVoe & Co. reported Monday there were 34 transactions in the first quarter, which it said was the third successive quarter with the same level of activity and maintained the record of 34 set in Q3 2019.
What Your Peers Are Reading
Buyer categories remained stable, with RIAs accounting for 41% of Q1 M&A transactions, maintaining their lead and essentially remaining flat in share, as they have for the past several years, according to the Q1 DeVoe & Co. Deal Book.
Consolidators followed close behind, at 38% of Q1 transactions, it said. However transactions by other buyers — including private equity firms, asset managers and other types of firms — spiked in Q1, representing 21% of volume, up from 15% for all of 2019.
After four years of a downward trend, the average seller size reversed course and neared the $1 billion mark, with assets under management coming in at $941 million, the firm pointed out.
Among the RIA buyers in Q1, “large seasoned acquirers made up a bulk of the list,” DeVoe pointed out. Creative Planning, Savant Capital, Cresset Capital and Frontier Wealth Management each had one transaction. (DeVoe represented Frontier in the purchase of Highwater Wealth Management.)
Franklin Templeton subsidiary Fiduciary Trust Co. International made two acquisitions in the quarter: Athena Capital ($6 billion) and The Pennsylvania Trust Co. ($4 billion), the report noted.
Among the consolidators, meanwhile, several firms made two acquisitions each in the quarter. They included:
- Mercer Advisors buying First Ohio Planning ($350 million) and CCP Inc. ($140 million);
- EP Wealth acquiring Guidant Wealth Advisors ($261 million) and International Research & Asset Management ($394 million);
- Cerity Partners purchasing EMM Wealth ($3 billion) and Sullivan & Serwitz ($1 billion); and
- Captrust acquiring Fountain Financial Associates ($654 million) and Welch Hornsby ($1.8 billion).
Echelon Partners reported Monday there were 46 transactions recorded in its M&A Deal Tracker in Q1, down from 53 in the fourth quarter of 2019.
Like DeVoe, Echelon said RIAs were the most active acquirers in Q1 and were responsible for 19 transactions, or 41%, of the total deals in Q1, according to Echelon.
Strategic acquirers/consolidators were the second most active, accounting for 15 transactions, or 33% of Q1 activity, Echelon said. Although banks and private equity firms were again among the least active in total deals, they were responsible for six of the top 10 acquisitions that took place in the quarter, according to Echelon.
During Q1, there were 17 deals of $1 billion or greater, with over 80% of those transactions announced in January and February, it said.
The top M&A transaction overall in terms of AUM picked up during Q1 was Morgan Stanley’s acquisition of E-trade, which delivered Morgan Stanley $360 billion in AUM, Echelon said.
On Friday, Fidelity said there were 23 RIA deals in Q1, totaling $29.9 billion in client assets, down 26% in the number of transactions, but up 35% in client assets compared with the year-ago quarter.