Registered investment advisors were merged or acquired at a record pace in 2018, according to a recent report from TD Ameritrade.
According to the TD Ameritrade report, produced by FA Insight, RIA merger and acquisition activity increased by 24 percent in 2018 with 88 transactions announced. The previous high of 85 was registered in 2015. Total AUM volume came in at $93 billion, an 18 percent decline from 2017’s total of $114 billion and well under the 2015 record transaction volume of $127 billion.
The report’s authors point to a trend of higher merger and acquisition activity among RIAs, as the past four years (from 2015 to 2018) experienced twice the transactions of the preceding four years (from 2011 to 2014).
Record activity is being supported by attractive business economics, a growing field of potential buyers and sellers and higher levels of deal-making expertise, according to the report.
In 2018, RIAs initiated 74 percent of the total transactions, up from 46 percent in 2017—with six acquirers accounting for more than four deals apiece and nearly two-fifths of all transactions. The report’s authors attribute the rise of RIA-initiated deals to desire among enterprise firms for more scale and efficiency, and the support of parent companies or private equity investors.
A contingent of RIAs have also emerged as experienced serial acquirers, often conducting multiple deals within the same calendar year, noted TD Ameritrade. These include the six multi-acquirers responsible for 38 percent of all transactions: Mercer Advisors, which conducted nine deals totaling $600 million in AUM; Buckingham Strategic Wealth, which conducted eight deals; CAPTRUST, which conducted four deals; EP Wealth Advisors, which conducted four deals; Focus Financial Partners, which conducted four deals; and Wealth Enhancement Group, which conducted four deals.
RIA transactions were unpredictable in 2018, with 30 deals taking place in the first quarter, followed by just nine deals in the second quarter. Deal-making activity rebounded with 21 deals in the third quarter, and 28 deals in the fourth.
In 2018, the average RIA transaction brought an additional $423 million in AUM to the purchasing firm.
TD Ameritrade believes deal-making activity should continue at its current pace, since the number of active acquirers is increasing and a growing number of advisors are approaching a typical retirement age.