Although the number of completed merger and acquisition transactions in the RIA space rose last year to 54, overall assets under management acquired fell by 26 per cent to $43.6 billion, according to new data from Schwab Advisor Services.

Although the number of completed merger and acquisition transactions in the RIA space rose last year to 54, overall assets under management acquired fell by 26 per cent to $43.6 billion, according to new data from Schwab Advisor Services.

While there were fewer (45) M&A transactions in 2012, they represented a higher amount of total AuM, at $58.8 billion. Meanwhile, even though there were nine more deals in 2013 than 2012, the total number this year is lower than the 57 and 70 seen in 2011 and 2010 respectively. While there were only 36 transactions in 2009, total AuM amounted to $60.6 billion.

Interestingly, the second half of 2013 closed with 36 completed deals totalling $28.2 billion in AuM, double the pace of 18 deals closed in the first half of 2013.

“While we did see an uptick in RIA M&A activity in the second half of 2013, mergers and acquisition for the year was actually very consistent with what we’ve seen in the past three years,” Jonathan Beatty, senior vice president of sales and relationship management at Schwab Advisor Services, told Family Wealth Report, sister news service to this publication.

“The first half of 2013 showed the lowest completed transaction levels since 2008, so by comparison Qs three and four were an expansion. The decrease in overall AuM acquired is largely a function of small- and mid-size firms leveraging M&A as a means to fast-track their growth,” he said.

RIAs overtake strategic acquiring firms
In other significant findings, RIAs emerged as the leading buyer category in 2013, capturing 44 per cent of overall deal activity for the year, while strategic acquiring firms slipped from being 2012’s top buyer (53 per cent) to 32 per cent.

“There was an identifiable trend last year during the second half of 2013 in which larger firms acquired smaller and mid-size firms, an indication that firms across the spectrum looked to M&A as a means to quickly expand their footprint,” Beatty said.

The latter trend highlighted by Beatty was also seen in Schwab’s 2013 RIA Benchmarking Study, in which 25 per cent of firms with between $100 million and $250 million in AuM reported to be actively looking to acquire another firm.

While it was found that client referrals and “centres of influence” are a primary channel for RIA growth, many firms are also looking to non-organic means - particularly by acquiring another firm, the study found.

As highlighted by Beatty previously, M&A is a good alternative for many advisors who are looking to expand in-house, and can “help the firm get to a solution faster”.

Meanwhile, Mark Tibergien, chief executive of Pershing Advisor Solutions, also highlighted that another big M&A trend at the moment is “same-model marriages”,  referring to RIAs rolling into other RIAs instead of into consolidators.

The latest data from Schwab reflects firms being sold with AuM exceeding $50 million as of 31 December, 2013.