A growing number of large RIAs are preparing their firms for sale, and more than a few are retaining investment bankers to draw up the required financial documents any acquirer would demand.
This trend was confirmed by Jon Beatty, senior vice president of sales and relationship management at Schwab Advisor Services. "Advisors are preparing themselves for an internal or external transfer," Beatty said. "We just need a catalyst."
M&A activity tracked by Schwab in the second quarter of 2012, traditionally a slow period, amounted to eight transactions for firms with combined assets under management of $12.3 billion. Those numbers were slightly skewed by a single $7 billion deal, Thomas E. Lee's acquisition of Edelman Financial. For the first half of this year, Schwab reported 25 mergers and acquisitions.
Two of the eight transactions involved private equity firms. "Private equity is also behind strategic acquirers," Beatty said. "It shows interest and support."
But national acquiring firms like Mariner Financial Services; Edelman Financial, which continues to engage in acquisition discussions even as it sells a majority interest to Thomas E. Lee; and Aspiriant remain the dominant acquirer group, according to Schwab. They accounted for three of the eight deals in the second quarter, and 50% of all transactions since the fourth quarter of 2011.
Beatty acknowledged that there are several crosscurrents in the present market for RIA firms. Advisors and acquirers both remain keenly interested in completing deals but tend to get cautious when the financial markets and economy display signs of weakness. At the same time, the potential prospect of higher capital gains taxes in 2013 is creating a sense of urgency at some firms.
Beatty noted that a growing ecosystem of acquirers and investors, including Hightower, United Capital, Focus Financial Partners and Fiduciary Network, provides RIA firms with an array of choices and different business models with which they can affiliate.