What You Need to Know
- Q3 M&A activity in the wealth management sector hit a record high of 78 deals, edging out the previous record of 76.
- In Q3, 12 direct private equity transactions took place, focused on building or investing in a wealth management M&A platform.
- The insurance sector is building wealth management platforms and human capital by acquiring turnkey asset management platforms, or TAMPs.
Third-quarter M&A activity in the wealth management sector hit a record high of 78 deals, edging out the previous record of 76 set in the first quarter, Echelon Partners reported Monday.
Echelon said it expects 2021 to significantly outpace last year’s deal count. The report projects 287 deals by year-end if the current pace continues, compared with 208 deals in 2020.
Strong secular trends are fueling this activity, Echelon said — consolidation, competition and succession planning — as are supportive capital markets — cheap debt, heightened corporate cash balances and heaps of private equity dry powder.
Transitory trends related to potential changes in tax rates have also contributed to the M&A frenzy.
Private equity juggernaut
Private equity interest in the wealth management sector has reached all-time highs, according to the report. In the third quarter, 12 direct private equity transactions took place, focused on building or investing in a wealth management M&A platform.
These included TA Associates’ investment in Caprock Group, Lightyear’s investment in U.K.-based Wren Stirling and Onex’s investment in Wealth Enhancement Group.
The majority of private equity-related deal activity has come via their portfolio companies, such as M&A powerhouses Mariner Wealth, backed by Leonard Green, and Mercer Advisors, backed by Oak Hill. This buyer group, which Echelon categorizes mainly as “strategics” or “consolidators,” accounted for 58 transactions in the third quarter and more than half of all transactions so far this year.