M&A Deals In US Registered Investment Advisor Sector Jumped Last Year - Schwab

Harriet Davies

29 January 2013

Merger and acquisition deal volume in the RIA industry US, as measured by assets under management, jumped 30 per cent last year compared to 2011, according to the latest data from Schwab Advisor Services.

In 2012, 45 deals were completed representing $58.8 billion in AuM. This is down from 57 deals in 2011, which nevertheless only represented $43.9 billion in assets. As such, average deal size shot up from $798 million to $1.31 billion.

The rise in AuM deal volume last year marked the reversal of a downward trend that had set in since 2007, when this figure peaked at $90.73 billion. It then fell year by year (bar a small rise in 2010) to last year’s low.

When deals are measured by number, though, the picture is quite different, with directional trends being less defined. Going back to 2004, deal number rose pretty steadily through 2007, before falling then reaching a peak in 2010 with 70 deals.

National acquiring firms on shopping spree

Last year national acquiring firms were the dominant buyer, making up 55 per cent of deals. They were followed by RIAs (20 per cent), “other” firms (16 per cent) and regional banks (9 per cent), as national banks didn’t make any purchases. In terms of significant changes from 2011, national acquiring firms ramped up their buying while RIAs completed far fewer acquisitions.

Breaking down the data by quarter shows that the first quarter was the busiest period, as 17 deals totaling $23.96 in AuM were completed. The rest of the deals were spread out fairly evenly over the year, with the final quarter seeing the most AuM changing hands after Q1.

"A destination of choice"

“The independent model has become a destination of choice for both advisors and high net worth investors alike, and the growth in the overall size of the deals we saw in 2012 is proof that this is a model that is growing and flourishing,” said Jon Beatty, senior vice president, sales and relationship management, Schwab Advisor Services. “It also points to a new inflection point for the industry, as RIAs appear to be actively considering M&A as a way to grow their business, and as a component of their succession planning efforts.”

Last year First Republic Bank acquired Luminous Capital in what was widely considered a landmark deal for the industry. Luminous had garnered some $5 billion in assets under management in just four years, and the deal price was reported to be between $125 million and $200 million.

“The deal is a strong testament to the value of the RIA model,” David DeVoe, a San Francisco-based strategic consultant, told Family Wealth Report near the time. “Luminous is a phenomenal success story, and the attractive valuation underscores how valuable the RIA model has become.”