RIA transaction activity in 2019 blew past previous years’ at levels never seen before, according to the recent “FA Insight Mergers & Acquisitions 2019 Year-End Update” report from TD Ameritrade Institutional.
Advisory firms announced 144 mergers or acquisitions, shattering last year’s record total of 90. The 2019 total was up 60% year over year and doubled the number of deals announced in 2017.
The deals also represented a record high $156 billion in AUM in 2019. Assets were up 66% over 2018 and 23% higher than the previous record of $127 billion, set in 2015.
The report attributed the surge in activity to factors such as a strong stock market, abundant capital, high firm valuations, an increasing demand for scale, aging firm founders looking for an exit strategy and multiple options for transacting partners.
It should be noted that this is the second significant activity surge over the last decade. The report pointed out that in 2015, there was a 93% jump in deals. But prior to that, yearly deals hovered around averaging 42 transactions per year during the 2011–2014 period. From 2015 to 2018, annual deal totals fluctuated around a much higher range, averaging 82 transactions per year.
And while the deal making was consistent throughout the year, the second quarter was especially busy. There were 41 transactions for the quarter, a level that was typical of annual totals just five to 10 years ago, the report said.
A growing number of acquirers were first-time buyers, the report noted. Fifty-four firms initiated their first deal, equal to the total firms (sole or repeat buyers) that initiated deals in 2018. And four of the first-timers (Bluespring Wealth Partners, Crestwood Advisors Group, Emigrant Bank and Integrated Partners) completed multiple deals during the year.
But the majority of transactions (59%) were initiated by repeat buyers. Seven of these multi-dealer acquirers initiated four or more deals during the year, together accounting for 26% of transactions. That group was led by Mercer Advisors with 11 deals.
Focus Financial the report noted, was not among the top in terms of direct investments, but it had a remarkable year in terms of both direct deals and sub-acquisitions of its affiliates. The firm influenced 18 deals in 2019.
The report pointed out that buyers of all types are facilitating the surge in deals. Four of the five acquirer groups last year significantly increased activity, while the fifth group, banks and trust companies, held steady relative to 2018, it said.
It further noted that RIAs have been partnering with other RIAs in initiating deals. First-time or ad hoc RIA buyers initiated 20 more deals than a year ago, nearly doubling their 2018 total in 2019. Total RIA-led deals, including RIA Multi-Dealers, dominated activity for the year, accounting for two-thirds of all mergers or acquisitions, the report noted. Other key players were holding companies, private equity investors and platform providers.
TD Ameritrade said 2019 marks the beginning of a new phase of heightened activity, and the conditions are favorable for continued growth in activity, considering the many motivating factors for transacting such as a desire for scale economies and firm founders’ needs for succession solutions.
Bolstering that, TD said is an established M&A infrastructure, comprising matchmaking services, M&A consultants, specialty lenders and a varied assortment of established deal partners, now in place that didn’t exist just a few years ago.