RIA mergers and acquisitions are off to a strong start for 2018, setting a record for activity in a single quarter, according to DeVoe & Company.
It remains to be seen if the year will follow the 2017 record, which started strong and then slid back.
There were 47 RIA mergers or acquisitions during the first quarter this year. Last year saw 46 transactions in the first quarter and then activity slowed to 41 in the second quarter and 32 and 33 in subsequent quarters. Activity for full years has increased during the last three years from 133 in 2015 to 145 in 2016 and to 153 last year.
The first quarter of 2018 saw 42 percent more deals than the last quarter of 2017.
“After two weak quarters of M&A activity, you couldn’t help but wonder if we were going to see a sustained slowdown,” said David DeVoe, managing partner of DeVoe & Company. “However, this record Q1 indicates that there is still strength in the market.”
Mercer Advisors based in Denver and Buckingham Strategic Wealth, a firm with a national footprint, achieved the most activity with three transactions each during the first 90 days of 2018.
“Consolidator business models continue to resonate with advisors, as RIAs seek the power of scale associated with a multibillion-dollar organization,” DeVoe & Co. said.
Sub-acquisitions, which refer to transactions executed by RIAs that had previously been acquired by other firms, accounted for nearly one-quarter of all the transactions carried out by an established RIA.
Sub-acquisitions are becoming a key facilitator for firms with less than $250 million in AUM as they carry out succession plans and try to gain scale, said Tim Forest, managing director of DeVoe & Company. “With a national footprint of more than 100 acquirers across the country, the stage is set for steep acceleration of these types of transactions.”
Nearly half of the transactions were RIAs selling to peers, rather than to larger consolidators.