Last updated: 11:42 / Thursday, 4 September 2014
Schwab Advisor Services Data

RIA Merger and Acquisition Activity in First Half of 2014 Remains Steady

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RIA Merger and Acquisition Activity in First Half of 2014 Remains Steady
  • Strategic Acquiring Firms emerge as leading buyer category as transactions among U.S. and offshore-based entities ticks upward
  • Sixteen deals were inked in Q2 totaling approximately $19 billion in AUM, compared to 13 deals totaling $14 billion in AUM completed in Q1
  • The average deal size also increased during the first half of 2014, reaching $1.13 billion, compared with $808 million in the first half of 2013
  • “While we see consistency in M&A activity in the RIA industry, with strategic acquiring firms continuing to show their buying power, we are not seeing the spike in industry consolidation that many analysts and observers have been predicting"

According to research conducted by Schwab Advisor Services on merger and acquisition (M&A) transactions in the independent registered investment advisor (RIA) industry, the first half of 2014 experienced a continued healthy pace of activity, with 29 completed deals totaling $32.6 billion in assets under management (AUM).

Transaction activity picked up in the second quarter of 2014, with deal flow increasing from the first quarter. Sixteen deals were inked in Q2 totaling approximately $19 billion in AUM, compared to 13 deals totaling $14 billion in AUM completed in Q1. Second quarter activity nearly reached the record high levels of Q3 and Q4 of 2013, each of which saw 18 completed transactions. The average deal size also increased during the first half of 2014, reaching $1.13 billion, compared with $808 million in the first half of 2013.

 “While we see consistency in M&A activity in the RIA industry, with strategic acquiring firms continuing to show their buying power, we are not seeing the spike in industry consolidation that many analysts and observers have been predicting,” said Jonathan Beatty, senior vice president, sales and relationship management, Schwab Advisor Services. “Based on the data in our research, it appears RIAs are indeed in a good position to monetize their firm’s value, but they are more often looking to preserve the owner-operator model and retain their independence through internal succession.”

Data from Schwab’s 2014 RIA Benchmarking Study released in July, indicated that 9 in 10 RIA firms are looking to develop internal successors, suggesting that founders and principals are seeking continuity of their firm’s people, culture and values. Although M&A data for the first half of the year indicates a seller’s market in the RIA industry, many advisors are actually choosing not to sell. Instead they are continuing to grow organically and create value in their firms by building enduring enterprises.

With more than one-third (36%) of all firms participating in Schwab’s Benchmarking Study having doubled their AUM and revenues since 2009, the steady M&A activity this year also reflects the healthy ecosystem of the RIA industry. The RIA model continues to attract not just investors and advisors, but also more types of acquirers – in the U.S. as well as internationally.

M&A data for first half of 2014 showed activity among Strategic Acquiring Firms (SAF) moving upward from the levels of 2013, representing 38 percent of the total deals closed, versus 31 percent of deals completed by RIAs. Additionally, the data shows an increase in acquisitions by offshore-based entities, which represent seven percent of the total deals recorded for the first half of the year.

“As RIA firms grow and continue to evolve into efficiently managed businesses built for enduring success, they will increasingly appeal to a broader range of buyers,” said Beatty. “Internal succession is one of the best ways to strengthen, scale and grow a firm to potentially make it more attractive to a buyer. I expect we will continue to see consistent M&A activity in the coming months as acquirers seek opportunities and advisors consider more choices to monetize their firm’s value as part of a succession strategy.”

Schwab Advisor Services reports M&A industry data twice yearly as part of a continued commitment to advancing the interests of RIAs, including a consultative approach that helps firms determine their transition options and plan strategically toward them.

You may access additional data in the pdf file attached-

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