RIA merger and acquisition activity skyrocketed in 2021, setting a record for the eighth consecutive year, DeVoe & Co. reported Tuesday. With 242 transactions posted, 2021 volume was 52% higher than in 2020, according to DeVoe’s RIA Deal Book.
All seller sizes increased their activity in 2021, but the big story last year was midsize sellers as volume of sales by firms with between $500 million and $1 billion in assets under management nearly doubled. The category added 6 percentage points to comprise 23% of transactions.
The prominence of midsize and larger sellers drove the average assets of selling firms to a record high of $1.1 billion — excluding sellers with more than $5 billion in assets to eliminate the effect of outliers. In aggregate, the total assets transacted also reached a peak, ending the year at nearly $600 billion.
On the buyer side, consolidators were dominant in 2021, executing 53% of all transactions, up 10 points from the previous year. According to the report, this momentum is the result of larger and more productive consolidator M&A and integration teams. Another accelerant is the proliferation of new entrants, often acquisitive RIAs that have shifted to become consolidators.
The RIA Deal Book focuses mainly on the acquisitions and mergers of what DeVoe & Co. considers “true” RIAs, and limits its tracking to RIAs with upward of $100 million in order to optimize the statistical accuracy of their reporting.
Analysts screen out SEC-registered hedge funds, IBDs, mutual fund companies and other companies that do not operate as traditional RIA firms. They also exclude the “advisors joining RIAs” category unless there are important developments.
According to the report, a variety of factors emerges each year and influences activity for a period of time. Regardless of how near-term trends and drivers affect 2022, RIA M&A will continue its upward trajectory for the next seven or more years.
See the gallery for the drivers of current RIA M&A activity, according to DeVoe & Co.