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April 20, 2021 at 04:30 PM
What You Need to Know
- RIA M&A is on track to surpass last year’s record-breaking 159 transactions, despite softened activity in February and March.
- The report cited continued high valuations, attractive value propositions of strong acquirers and the heightened inclination of RIAs to sell externally.
- RIA M&A activity is likely to increase amid changing owner demographics, continued lack of succession planning and rising interest in joining forces with bigger firms.
First-quarter RIA merger-and-acquisition activity set a record of 58 transactions, with a monthly high of 33 transactions in January, slowing to 25 in February and March, according to a report from DeVoe & Co.
RIA M&A is on track to surpass last year’s record-breaking 159 transactions, notwithstanding softened activity in February and March.
The report cited these reasons: continued high valuations, attractive value propositions of strong acquirers and the heightened inclination of RIAs to sell externally.
DeVoe & Co. expects more firms in the $500 million to $1 billion range of assets under management to sell over the next several quarters. These midsize and smaller outfits constituted 26% of activity in the first quarter, up from 17%–18% in recent years.
The report said the new normal of RIA M&A activity is likely to arc upward over time, and continue to be strong for five to seven more years, with owner demographics, continued lack of succession planning and increasing interest in joining forces with bigger counterparts supplying an increasing stream of sellers.
According to the report, valuations for sellers will expand in range. Firms that reacted quickly to the pandemic and even flourished over the last year will command high valuations, while those that struggled may find their offers disappointing.
