What You Need to Know
- Both Echelon Partners and DeVoe & Co. reported a drop in M&A deals from a strong Q1.
- But DeVoe says overall first-half activity is up, and this year is on track to eclipse last year's all-time high.
- Strategic buyers or consolidators have been the most active acquirers so far in 2021.
In two new reports, Echelon Partners and DeVoe & Co. discuss the slowdown in RIA merger-and-acquisition activity in the second quarter and several trends that emerged during the period.
Echelon Partners identified 54 deals in the second quarter, off the record-setting 76 deals in the previous quarter.
The firm said it expects deal activity to pick up as the second half gets underway, spurred by sellers looking to take advantage of buoyant markets and eager to avoid any change in tax policy.
DeVoe counted 43 RIA transactions in the April-to-June period, bringing the first half total to 101 deals.
The six-month period is 51% above the same period in 2020, according to DeVoe. It said 2021 activity can be expected to eclipse last year’s all-time high of 159 transactions.
Echelon Partners says it tracks all RIA deals using a proprietary methodology.
DeVoe focuses only on what it calls “true” RIAs and transactions of $100 million or more in assets under management. It screens out the SEC-registered hedge funds, IBDs, mutual fund companies and other companies that do not operate as traditional RIA firms, as well as the “advisors joining RIAs” category, unless there are important developments.
DeVoe’s analysis pointed to key drivers of the continued acceleration of activity it expects. Valuations are at an all-time high, luring previously reluctant sellers to the negotiating table. Seasoned acquirers are dangling strong value propositions to attract more sellers to the negotiating table.
Moreover, the pandemic shocked many advisors into crafting succession plans, and many realize that an internal sale is not an option, it said.
Consolidators continue to be the industry’s top acquirers; in the first half, they accounted for 41% of announced transactions. Five consolidators initiated 30 of the 37 acquisitions in the first six months of the year.