Mega deals fuel robust RIA M&A market

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M&A deals in the RIA space jumped nearly 50% in average value to a record $1.7 billion in the fourth quarter, according to Charles Schwab.

The period also saw records broken for the number of transactions in a year (94) and the overall value ($135.5 billion), according to the quarterly report released this week by Schwab Advisor Services. The $1.4 billion average deal value for 2016 surpassed every year since 2009.

Additionally, the 20 deals from the fourth quarter valued at $34.6 billion in assets under management led to the highest average for any period in the past 10 years tracked by Schwab.
The $1.7 billion average for M&A is “clearly evidence of a vibrant market for independent advisers,” says Jonathan Beatty, a senior vice president with Schwab’s Advisor Services division. “These record levels of M&A certainly point to a robust marketplace for buyers and sellers.”

Major deals struck in the second half of the year included Pathstone Federal Street’s purchase of Convergent Wealth Advisors from City National Bank and the merger of Tiedemann Wealth Management with Presidio Capital Advisors. The two deals were worth nearly $20 billion.

Companies acquired more than $1 billion in AUM in 28 separate transactions in 2016, up from 22 in the previous year and just eight a year earlier, the firm’s study noted.

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The total number of RIA M&A deals grew by 12% in 2016 from 84 in 2015 and by 74% from 54 in 2014, according to Schwab. The overall AUM changing hands surged by 17% from $115 billion in 2015 and by 186% from $47 billion in 2014, Schwab’s figures show.

Other RIAs and aggregators comprised the majority of buyers last year. Private equity firms made 20% of the purchases, while banks completed 9% of them and international buyers executed 1% of them.

The overall volume reflects trends such as newly-acquired firms who then purchase other firms, Beatty says. Prospective sellers have more choices these days among “very experienced and capable buyers,” he adds.

“It is to be seen whether we will push on to new records or if we’ve established a new plateau for the industry,” Beatty says.

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RIAs M&A Practice management Charles Schwab Convergent Wealth Advisors City National Bank
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