The total wealth management M&A activity among registered investment advisors dropped in the second quarter of 2022, its second straight quarter of decline, according to Echelon Partners.
But the activity in the first half of the year is still higher than it has been in past years, and 2022 is still on track to be a record-breaker year—unless there’s a big decline in the second half, the consultant and investment bank said.
The preliminary results of “Echelon’s RIA M&A Deal Report” were released early this week and the Los Angeles firm expanded on the results today in a longer report.
“The 87 deals announced in 2Q22 is also the most we have observed in a second quarter and the third highest quarterly total Echelon has tracked. Given these trends, [the firm] projects 308 total transactions for the year, indicating a slight increase over the 2021 record," Echelon said.
The firm said that the consolidation has continued despite worries about recession and macroeconomic trouble.
“Any future slowdown, driven by macroeconomic headwinds, will likely be transitory and result in pent-up demand in future years. We continue to believe we are in the early innings of a long cycle of RIA consolidation,” the firm said.
The 87 deals in the second quarter was down from 94 in the first quarter, but up from 54 in the second quarter of 2021 and 35 in the second quarter of 2020. The firm tracked 39.2% more deals in the first half of this year than the first half of 2021.
Echelon said the average AUM per deal has declined—falling 12.1% year to date from the average AUM per transaction logged in 2021. Part of that stems from a decline in the number of deals involving more than $1 billion in AUM.
“In total there were 34 deals involving over $1 billion in AUM announced in 2Q22, which is a 20.9% decrease relative to [the fourth quarter of 2021’s] total of 43 $1 billion-plus deals," the firm said, adding that 56% of the acquired firms announced in the second quarter of this year had less than $1 billion in assets under management, and the average AUM in these deals was $380 million.
It demonstrates “the smaller subsect of RIAs are continuing to participate in M&A,” Echelon said.