The registered funding advisor deal area has been booming over the previous decade, and forward-looking indicators level to extra development forward partially fueled by non-public fairness buyers, based on Constancy Investments’ tenth annual RIA M&A exercise report.
Constancy’s monitoring of deal bulletins reveals 233 RIA acquisitions final yr, in contrast with 89 in 2015, a 10-year compound annual development fee of 14%. In the meantime, bought property from these offers elevated from $130 billion to $670 billion.
Whereas the numbers have risen, the explanations behind the offers have largely remained the identical, mentioned Laura Delaney, vice chairman of apply administration and consulting for Constancy.
These drivers are RIAs seeking to broaden shopper companies, higher deal with the burdens of HR, authorized and compliance by accessing a central assist platform, and planning for succession.
“Till these basic drivers go away, we’re going to see M&A for years to return,” Delaney mentioned.
The tempo of offers has been fueled by non-public fairness funding, whilst rates of interest have climbed larger, Delaney mentioned.
In accordance with Constancy, non-public fairness backed 89% of RIA offers in 2024, a document. Compared, non-public fairness corporations financed 43% of RIA acquisitions in 2016.
Personal fairness normal companions are additionally extending their funding holding intervals in these corporations past the same old 5 to seven years, turning into extra lively house owners and reaping the wholesome money flows RIA’s can generate.
“PE is turning into far more concerned in [RIA] agency technique,” Delaney mentioned. “They got here in at first with a message of, ‘Right here’s our capital, and we’d love so that you can use it as you see match.’ We’re seeing that dial as much as extra lively technique setting at the start of the yr. … They’re enjoying the longer sport and betting on these dependable returns.”
Whereas extra aggregators have additionally entered the acquisition area, a lot dealmaking has been pushed by a comparatively small group of strategic acquirers. Since monitoring started in 2015, 105 corporations have made not less than two acquisitions, and 43 have accomplished not less than 5.
Final yr’s prime dealmakers included Focus Monetary and its consolidating associates (21), Wealth Enhancement Group (12), Waverly Advisors (10), MAI Capital Administration (10), Mercer (9), and Allworth Monetary (9).
Along with the record-setting RIA offers in 2024, the dealer/supplier channel additionally yielded six transactions of $240 billion in property.
As Constancy admits, these numbers usually are not the complete image. The reporting doesn’t embrace recruiting occasions the place groups are acquired with remuneration pay or M&A with out an accompanying public notification.
Delaney mentioned all indicators level to the market persevering with to be frothy within the coming years, with a possible “third wave” of personal fairness funding on the horizon. As well as, offers are beginning to proliferate exterior of RIA consolidation to different areas of monetary companies as corporations look to turn into one-stop fiduciaries.
Constancy counted 21 adjoining apply acquisitions by wealth administration corporations in 2024 in areas comparable to tax practices, funding corporations and enterprise consulting practices.
Delaney calls these adjoining acquisitions “chapter two” of the RIA deal evolution after the preliminary wave of wealth managers buying friends.
She mentioned chapter three will contain a mega-merger within the area, a pattern many are predicting and one that would considerably form the long run decade within the trade.
“We don’t but know the way it will occur, however it’s one thing we’ll be maintaining our eyes on,” she mentioned.
