Fidelity: RIA Deals Accelerate in Q3

Many industries in which merger and acquisition activity has been a dominant force have not seen a return to pre-pandemic activity levels.

In the largely fragmented RIA channel, however, M&A has accelerated at a rapid pace since June after starting to rebound from a three-month slowdown driven by the onset of the coronavirus, Fidelity Investments reported Tuesday.

During the third quarter, the RIA channel had 37 transactions, representing $48 billion, the highest total transactions and assets for any quarter since Fidelity began tracking in 2016.

Deal size continued to rise during the July-September period. Fifteen deals involving $1 billion-plus sellers broke the previous record of 10 deals in the fourth quarter of 2019.

In total, 41% of the third quarter's deals and 82% of its assets under management involved sellers with more than $1 billion in assets.

Despite the steep drop in activity from March to May, year-to-date totals are down by only 12% in transactions and 11% in assets under management from record-breaking 2019, and indications are that this strong pace will continue through the end of 2020.

According to Fidelity, the buy side continues to be increasingly competitive as already aggressive serial acquirers are seeing new players. For example, CI Financial, with no prior deals, has completed five since November, and Creative Planning has eight so far this year.

IBD Transactions Slowing

After two years of transformative transactions in the independent broker-dealer space, fewer transactions took place in 2020, according to Fidelity.

Citing a Cerulli Associates report, it noted that there were 105 broker-dealers in the IDB channel as of year-end 2018. Fifteen of those were acquired in 2019, representing 14% of the total industry, a figure that Fidelity said is likely unmatchable.

It said firms may be taking time to focus on integrating their acquisitions after a period of such significant consolidation, and implementing management and platform changes that strengthen their enterprises and help them reap the benefits of scale.

LPL Financial acquired two small broker-dealers earlier this year, and Cambridge Investment Research purchased one during the third quarter.

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