M&A in the registered investment advisor space remained strong in the first quarter, with 90 transactions representing $570 billion in assets under management closing, 85.6% of which went to strategic acquirors, according to investment bank Echelon Partners.
The most active acquirors were MAI Capital Management, with four deals totaling $2.65 billion in assets under management; Mariner Wealth Advisors, with three deals totaling $104 billion in AUM; Mercer Advisors, with three totaling $3.2 billion in AUM; Diversify Wealth Management, with three totaling $2.1 billion in AUM; Perigon Wealth Management, with three totaling $800 million in AUM, and Allworth Financial, with three totaling $921 million in AUM.
The number of transactions represented a 20% increase over the first quarter of 2023, with the start of this year turning out to be the second most active first quarter ever. Top spot is still held by the first quarter of 2022, when 94 deals were transacted, according to the report.
Echelon predicted that if the pace continues for all of 2024, the year will end up with the second-highest level of deal activity, with 330 transactions. By comparison, 2021 had 307, 2022 had 341 and 2023 had 321.
“This sets the stage for a year of robust M&A activity, helped by recent strong market performance and a stabilizing interest rate outlook,” the report said. “Overall transaction count is likely to show a year-over-year increase, and we also expect average assets per deal to substantially surpass last year's level.”
As 2024 has already seen 35 $1 billion-plus AUM deals, the average AUM per deal has risen to $1.839 billion. Last year it was $1.668 billion and in 2022 it was $1.622 billion. The report said it expects 130 of these high-flying deals to close in 2024, which would be a 12.1% increase over last year.
“Echelon expects buyer demand for these larger and relatively well-established firms to continue as they provide excellent entry points into new markets and platforms for potential sub acquisitions,” the report said.
While AUM often is used as a proxy for valuation in understanding trends in private M&A deal flow, little bits of public information can bring some clarity on where RIA valuations stand, the report said. For example, when private Atria Wealth Solutions, with $100 billion AUM, announced its sale to public LPL Financial, the price tag was reported as $805 million.
However, since then total consideration is estimated to top $1.38 billion, which would be a 7.9 times multiple on EBITDA, the deal report said.
That deal was the largest of the quarter and represented 2,400 advisors.
For all that’s said about private equity money in the RIA space, pure private equity plays represented just 13% of the transactions in the first quarter. However, private equity firms have significant buy-ins to most of the largest strategic acquirers and provide the capital for acquisitions, the report said.