RIA merger and acquisition activity has surpassed the 2020 full year activity of 159 transactions with a full 95 days left in the year, according to research from DeVoe & Company.
With this new high-water mark, 2021 is officially the eighth successive record year of RIA M&A activity, the firm notes in a Sept. 27 announcement.
From a quarterly perspective, the third quarter will also set a new high. With 59 transactions and a few days to go, the third quarter has surpassed the standing record of 58 transactions in a quarter set during the first quarter of 2021.
Consequently, a new pattern of quarters with 50-plus transactions is beginning to emerge after 40-plus being the prior normal, DeVoe further observes.
This news comes following the firm’s earlier release of its second quarter 2021 RIA Deal Book showing that despite a slower second quarter, the century mark was broken less than six months into 2021, and the first half ended with 101 transactions.
In that report, the firm observed that fear of pending tax changes is a key factor driving M&A activity, but added that several other factors are likely to drive up year-end activity:
- valuations are at an all-time high, attracting formerly reluctant sellers to the negotiating table;
- seasoned acquirers are attracting more sellers with strong value propositions; and
- COVID shocked many advisors into crafting succession plans and many are realizing that an internal sale may not an option.
“The amount of M&A activity and interest in transactions among advisors is truly unprecedented,” says David DeVoe, Founder and CEO, DeVoe & Company. “High valuations, a newfound focus on solving succession and achieving scale, and concerns about looming tax increases are driving an acceleration of external sales.” That said, DeVoe further emphasizes that in the midst of high valuations and tax-mitigation actions, advisors can’t forget the importance of culture when deciding on a new partner.
The announcement that the 2021 deal volume has already eclipsed last year’s total follows the recent release of Nationwide’s 7th annual Advisor Authority study showing that many financial advisors expect consolidation and M&A activity in the RIA space to increase in the next 12 months and more expect M&A to have a positive impact on their practices.
In fact, large majorities of RIAs and fee-based financial professionals (73%), wirehouse financial professionals (74%) and BD financial professionals (65%) say that consolidation and M&A in the RIA industry will increase, according to the survey of nearly 2,500 advisors, financial professionals and individual investors.
