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Industry Spotlight > Mergers and Acquisitions

Record Number of RIA M&A Deals in Q4: Report

By Michael S. Fischer

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The wealth management sector experienced its most active quarter in history, with 69 deals taking place in the October-to-December period, Echelon Partners reported Wednesday.

Related: Why Small Firms Should Relish the Effects of Consolidation

That was up by 25% from the 55 deals recorded in the third quarter, itself a high-water mark.

RIA M&A is on the cusp of a record-breaking year, with at least 205 deals registered as of Dec. 22, which compares with 203 deals Echelon reported in 2019.

Quite an achievement considering that at the end of the second quarter, only 162 total deals were forecast for 2020. The second quarter was the slowest period for RIA M&A in four years, the report said.

This year now represents the eighth consecutive year that the total number of deals in the RIA industry has increased.

According to Echelon, the size of firms acquired in 2020 also hit a new record, an average of $1.8 billion, which is up 24% over 2019’s average of $1.5 billion and is the highest annual average to date.

New players have streamed into the wealth management sector this year, attracted by the industry’s high profitability and steady cash flows. During the fourth quarter, Kingswood raised a $115 million special purpose acquisition company, the first SPAC in the RIA M&A environment, according to the report.

Related: SPACs: What Advisors and IPO Investors Should Know

Private equity’s presence in the sector continued to expand through direct and secondary investments, and professional buyers aggressively sought high-quality RIAs.

The report identified these key trends:

  • Minority investments by private equity in the most prominent wealth management platforms continued to grow.
  • Retirement plan asset consolidation gained speed.
  • Wall Street banks continued to covet Main Street investors, e.g. Morgan Stanley’s purchase of E-Trade.

Michael S. Fischer

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