Private equity firms and serial acquirers made a comeback to the field of buyers of registered investment advisory firms in the third quarter, with most acquisitions involving bigger RIAs, according to a new report.
More private equity firms made RIA acquisitions in the quarter, with over half the deals including RIAs with more than $1 billion in assets, according to Pershing Advisor Solutions' Real Deals Quarterly Update for the third quarter.
While the third quarter generated only a slight increase in overall financial industry merger and acquisitions, the total amount of assets under management of purchased and merged firms grew significantly.
The total firms acquired or merged in the third quarter had $1.35 billion in median assets under management, up from $800 million in assets for the typical firm in the second quarter, and a 75% increase relative to the median amount for firms in the third quarter of last year.
After being largely absent from RIA acquisitions in 2010 and the first half of 2011, private equity firms served as acquirers in three of the eight deals in the third quarter, with those three deals accounting for more than 70% of the assets of target firms this quarter, according to the report.
The nearly $16 billion of total assets of the targeted RIA firms are significantly higher than any of the previous three quarters, according to the report.
Eight of the third quarter deals targeted retail-focused RIA firms with at least $50 million in AUM or $500,000 in annual revenues in the third quarter of 2011, one more than the previous quarter.
Several large private equity firm transactions marked the third quarter, with each involving RIA firms with more than $1 billion in assets.
Warburg Pincus LLC made the largest deal of the quarter by buying a controlling stake in The Mutual Fund Store LLC, a fee-only RIA with more than $6 billion in assets. The deal will help speed up Mutual Fund Store's growth as it aims to strengthen its national brand, according to the report.
The Carlyle Group made its own large private equity deal, purchasing a minority interest in Avalon Advisors LLC. The deal will help Houston-based Avalon, which has nearly $4 billion in assets, expand outside the Texas market, according to the report.
The third quarter also saw a spike among serial buyers, whose role in RIA acquisitions had diminished in the past few years. While the second quarter lacked any serial buyer deals, three deals were struck in the third quarter, with two made by Focus Financial Partners, LLC.
After going nearly nine months since its last direct RIA acquisition, serial buyer Focus Financial made two relatively large acquisitions at the close of third quarter, first acquiring The Colony Group LLC, a Boston-based RIA with $1.3 billion in assets.
Shortly after, Focus acquired Hufford Financial Advisors LLC, an Indianapolis-based RIA targeting dental professionals. The two deals bring Focus Financial's total assets under management to more than $45 billion.