RIA firms continued their deal-making dominance in 2019, almost doubling the number of mergers and acquisitions completed during the same period last year, according to the “FA Insight Mergers & Acquisitions 2019 Mid-Year Update” from TD Ameritrade Institutional.
Advisory firms announced 69 mergers and acquisitions in the first six months of 2019, an 82% increase from the same period in 2018, when 38 deals were made. This marks the most active six months since FA Insight began tracking advisory firm M&A activity in 2000, the report noted.
The deals represent a total of $57 billion in motion during the first half of 2019, up 39% from the same period last year.
According to the report, the pace of M&A announcements picked up considerably over the past year, with each of the past four quarters seeing gains. Advisory firms recorded a high of 33 deals in the quarter ended March 31, reaching an all-time high of 36 in the quarter ended June 30.
Independent RIAs led the way with 75% of transactions, after representing 73% during all of 2018. The report pointed out that while they represent only a small uplift in the percentage of total deals, RIA dealmakers are holding their own in 2019 given the strong uplift in actual deal numbers to date.
As indicated in the report, the number of one-off deals by RIAs outnumbered those initiated by “RIA multi-dealers” (firms with a track record of initiating multiple deals). The greater share of ad hoc RIA activity counters the trend of recent years, signaling that a greater number of RIA firms are entering the mergers and acquisitions market and initiating transactions, the report said. It added that while the share of RIA multi-dealers may have fallen off, total deals initiated by this group continue to grow. For example, Mercer Global Advisors announced four acquisitions, and Wealth Enhancement Group announced three.
Focus Financial Partners was most active of all investor multi-dealers in terms of both direct deals and sub-acquisitions, the report noted. In all, the firm and its partner firms initiated 16 deals, representing 23% of the 2019 year-to-date total. Wealth Partners Capital Group and its partners MAI Capital Management and EP Wealth Advisors made five, and New York Private Bank & Trust/Fiduciary Network and its partner RegentAtlantic initiated one, its first deal.
Driving the deals are factors such as the expanding presence of RIA firms, including many that are committed to acquiring other advisory firms in order to create scale and establish national brands, the report said. It added that the fertile environment for mergers and acquisitions is also being helped by security market appreciation and continued economic growth, combined with a growing number of options for deal financing.
The total AUM of firms targeted for deals in the second quarter reached $36 billion, the second-largest quarterly total on record, and a sum about equal to all the deals in the first two quarters of 2018, the report noted. The second quarter also saw a dramatic increase in AUM over the first quarter of 2019, when fewer deals were initiated and more deals targeted smaller firms.
Furthermore, 58% of deals were directed toward firms with $100 million to $500 million in AUM through the first two quarters. The report pointed out that in no previous year has this size range accounted for more than half of deal activity.