Wealth management M&A activity at record clip in first half of the year
RIA transactions were up 49 percent from the first half of 2018, and assets transacted increased 55 percent.
Merger and acquisition activity among wealth management firms hit record volumes for the first half of 2019, according to data compiled by Fidelity Clearing and Custody Solutions.
Transacted assets under management, total deals, and deals over $500 million and $1 billion in AUM were the highest for any six-month period since Fidelity began tracking M&A activity in 2016.
All told, 73 deals amounted to $460.5 billion in assets transacted. Of those, 67 were RIA deals, totaling $69.5 billion in assets transacted. RIA transactions were up 49 percent from the first half of 2018, and assets transacted increased 55 percent.
Of the RIA deals, 14 acquiring firms completed 48 transactions, or 72 percent of activity in the advisory space. Focus Financial Partners acquired 15 RIA firms in the first half of 2019; CAPTRUST acquired five RIAs; Mercer Advisors and Mariner Wealth Advisors each acquired four firms.
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The first two quarters of 2019 were the fist time Fidelity has tracked back-to-back quarters with 30-plus RIA acquisitions; there were 30 in the first quarter, and 37 in the second.
The median transaction was $404 million in AUM in Q1, and $500 million in Q2. Total RIA assets transacted were $22 billion in Q1, and $47.5 billion in Q2, the highest for one quarter on record.
Three $1 billion-plus transacted deals occurred in June. Kingenstein Fields Wealth Advisors acquired Solaris Advisors’ $1.54 billion in AUM. Wealth Enhancement Group acquired Planning Solutions Group’s $1.3 billion in AUM. And CAPTRUST Financial Advisors acquired McQueen, Ball & Associates’ $1.3 billion in AUM.
In the first half of 2019, 23 sellers had assets between $250 million and $500 million. Another 18 had between $500 million and $1 billion. Eleven sellers had $1 billion to $4 billion in AUM, and three had $4 billion to $10 billion.
Cerity Partners’ acquisition of Blue Prairie Group’s $11 billion in AUM was the largest RIA deal in the first half of 2019.
“With new financing options flooding the marketplace, these larger RIAs can complement organic growth, enter new territories, or acquire top advisors and other specialized skills,” writes Scott Slater, M&A specialist and Fidelity Clearing & Custody Solutions vice president of practice management.
“Acquiring the right talent can be critical as the pressure to demonstrate value to clients increases,” added Slater.
The average age of selling managing partners was 58. As the average age of advisors continues to rise, capital from the deals is helping some firm address succession planning, according to Fidelity’s analysis.
There were six broker-dealer deals in the first half of 2019, totaling $391 billion in transacted assets.
Reverence Capital Partners acquired Advisor Group’s $268 billion in AUM. Private equity firm Warburg Pincus acquired Kestra Financial’s $77 billion in AUM.
“With markets at record highs, some owners may see the advantage in selling during favorable conditions to maximize the value they receive for their business,” writes Slater.
“Continuous pressure surrounding the costs for end investors has put a strain on revenue, and is motivating some firms to join a larger platform to improve their scale. Activity in the IBD channel could also be driven by comparatively favorable pricing for capital partners, who see an opportunity to aggregate broker-dealers while multiples are low in comparison to the RIA market,” he added.
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