The surge in activity in the fourth quarter fueled another record-breaking year for mergers and acquisitions among registered investment advisor firms, with 69 deals through December 22 representing a 25% jump from the 55 deals done in the third quarter, the previous high-water mark, according to a report by ECHELON Partners.
And ECHELON recorded at least 205 deals for the entire year versus 203 deals in 2019, marking an all-time high for the eighth consecutive year.
ECHELON said the wealth management industry attracted several new players over the past year, including the first special purpose acquisition company, or SPAC, with Kingswood Acquisition Corp. raising $115M as the first blank check company in the RIA space. (It has yet to acquire a firm.) Also, private equity companies continue to grow through direct and secondary investments, and professional buyers aggressively pushed to acquire high-quality RIAs.
Transactions involving private equity included Abry Partners acquiring a minority stake in Beacon Pointe ($11.5 billion in AUM) and GTCR acquiring a minority stake in CAPTRUST ($45 billion in AUM).
This year’s transactions also saw a record increase in average assets under management per deal over 2019, according to ECHELON's "Q4 2020 M&A Deal Report." The average AUM acquired per transaction grew to more than $1.8 billion, a 24% increase over last year’s average of $1.5 billion, the highest annual average to date, ECHELON said.
Larger, well-capitalized buyers outdid smaller firms in acquisitions. As indicated in the report, the most notable transactions included DiMeo Schneider’s purchase of Fiduciary Investment Advisors ($84 billion in AUM), Morgan Stanley’s acquisition of E*TRADE ($360 billion in AUM) and Empower Retirement’s acquisition of Mass Mutual’s $167 billion retirement business.
One of the largest fourth-quarter transactions was the acquisition of Allworth by Lightyear Capital and the Ontario Teachers’ Pension Fund in October ($10 billion in AUM). This deal, ECHELON said, signals two trends: An increase in private equity-to-private equity transactions, and the growing presence of institutional investors in wealth management deal making.
The year’s most active acquirers had seven or more deals under their belt. Leading the way is CI Financial Corp. with nine, followed by Hightower Advisors and Creative Planning with eight each. Mercer Advisors and Focus Financial both made seven deals.