Merger and acquisition activity among registered investment advisors rose in this year's first half versus the prior year, at least in terms of the number of deals made, according to the mid-year report by Schwab Advisor Services.

As of June 30, there were 40 M&A deals industrywide involving RIAs, which is the highest total in the first half of a year since Schwab began to track this space in 2003. Those deals represent $30 billion in assets, for an average deal size of $771 million.

But deal sizes on the whole are much smaller than last year, when the 71 M&A transactions represented $103 billion in AUM. That equated to an average deal size of $1.5 billion.

The reason: Advisory firms with AUM of $250 million or less comprise a greater-than-normal percentage of deals. According to David DeVoe, managing director of strategic business development at Schwab Advisor Services, firms with $250 million or less typically comprise about one-third of all M&A activity. In this year's first half, they comprised 53%.

DeVoe attributes that to greater confidence by smaller firms to make deals, along with the fact that smaller deals close more quickly than larger deals.

"The beginning to end of negotiations for RIA M&A deals is generally about nine months," DeVoe says.

The busy pace of M&A activity during this year's first half-and the likelihood for a strong full-year pipeline-contrasts with the depressed M&A market in 2009. Last year's total of 71 M&A deals was a 19% decline from the prior year. And the total dollar amount from last year's deals fell almost 25% versus 2008.

DeVoe blamed that on the market crisis that caused assets under management, cash flows and revenue at RIA firms to drop. In turn, that pinched valuations at advisory firms and made transactions less appealing for sellers.

More important, DeVoe says, advisors stepped away from the negotiating tables to increase their face time with clients during the downturn.

"Now that the markets have stabilized to a degree, RIAs are re-engaged and we're seeing more transactions," DeVoe says.

DeVoe says leading indicators point toward continued momentum in the M&A space.

On a short-term basis, he says there's greater RIA participation in Schwab webcasts and conference calls dealing with M&A issues, as well as on the company's online listing service that matches buyers and sellers.

And as was the case last year, DeVoe says the biggest consolidators of RIA assets have been RIAs themselves. "Clearly, RIAs have gotten more sophisticated and are using mergers and acquisitions to achieve their strategic goals," he says.