What You Need to Know
- Sixty-three percent of RIAs surveyed said they expect merger-and-acquisition activity to continue to increase this year.
- The COVID-19 pandemic accelerated activity, focusing advisors on their goals, mortality and lack of succession plans.
- Appetite for acquisition increases with firm size: 90% of firms with over $3B plan to make an acquisition in the next two years.
Sixty-three percent of RIAs in a recent survey said they expect merger-and-acquisition activity to continue to increase this year, DeVoe & Co. reported this week. Forty-seven percent of advisors said activity would rise somewhat, and 16% said it would do so considerably.
Why? RIAs cited a variety of reasons, including high valuations, aging of firm founders and proliferation of serial acquirers.
A third of advisors in the survey said they expect activity to maintain its current pace, while just 4% expect a decline in activity.
Contrast the new findings with those of a year earlier, gathered in the early days of the pandemic. Seventy-five percent of respondents expected a decline in M&A activity, and none projected an increase.
In fact, the pandemic accelerated activity, the new report says, focusing advisors on their goals, mortality and lack of succession plans. Many decided to sell externally.
Thirty-nine percent of respondents in the new survey said they expect valuations to increase in 2022, even as these are already at record levels. DeVoe & Co. suggested that they may expect well-financed acquirers to bid one another up, or that synergies remain to be unlocked.
Fifty-three percent of advisors said valuations have plateaued and will hold steady this year, while 8% anticipated an imminent decrease as valuations, in their view, have exceeded appropriate norms.
DeVoe & Co. conducted the survey between Sept. 2 and Oct. 28 among 131 senior executives, principals or owners of RIAs ranging in size from $100 million to more than $5 billion in assets under management.