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Industry Spotlight > Mergers and Acquisitions

RIA M&A Activity on Pace for Record-Breaking Year: Echelon

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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. 

Eight of the third quarter’s top 10 transactions were announced by either strategics or consolidators. The report highlighted the activity of Wealth Enhancement Group. It is tied with Focus Financial for the most deals of the quarter, but it is the only buyer to appear twice in the list of the third quarter’s top 10 transactions. 

Echelon said this is a good example of large dealmakers’ ability to simultaneously participate in and ultimately win multiple M&A efforts and successfully manage the due diligence and integration processes that come with each transaction.

Wealth Tech Trends Proliferate

According to the report, the insurance sector is building wealth management platforms and human capital by acquiring turnkey asset management platforms, or TAMPs. It noted that TAMP acquisitions increase potential distribution channels for insurers, and they also enable them to offer wealth services to registered agents who are interested in becoming investment advisory representatives. 

Three transactions speak to this trend in 2021. The largest, as measured by assets under management, is Simplicity Group’s acquisition of Sawtooth, in which Echelon Partners was exclusive M&A advisor to Sawtooth.

The Sawtooth TAMP offers a flexible, comprehensive unified managed account platform customized to meet the needs of financial advisors and wealth management firms. 

Echelon said the strategic partnership of Simplicity and Sawtooth brings together two firms each backed by strong tenure and advantageous positioning across a multitude of operational service sectors in the wealth management space.