Merger and acquisition activity picked up in the second quarter of 2014, with 16 deals inked totaling approximately $19 billion in assets under management, according to a new report.
Schwab Advisor Services says that builds on 13 deals totaling $14 billion in AUM completed in Q1, and that second quarter activity nearly reached the record high levels of Q3 and Q4 of 2013, each of which saw 18 completed transactions.
The average deal size also increased during the first half of 2014, reaching $1.13 billion, compared with $808 million in the first half of 2013.
Schwab notes that while M&A data for the first half of the year indicates a seller’s market in the RIA industry, many advisors are actually choosing not to sell. Instead they are continuing to grow organically and creating value in their firms by building enduring enterprises.
M&A data for first half of 2014 showed activity among Strategic Acquiring Firms, moving upward from the levels of 2013, representing 38% of the total deals closed, versus 31% of deals completed by RIAs. Additionally, the data shows an increase in acquisitions by offshore-based entities, which represent 7% of the total deals recorded for the first half of the year.
It seems that the choice for advisors is to either sell or develop an internal succession plan. But a third option becoming popular in the DC market led by so-called aggregators. Firms like Captrust, Sageview, NFP Retirement, Sheridan Road and Pensionmark offer varying models for advisors to preserve their practice while joining a larger firm to leverage resources and brand. It’s estimated that these aggregators now hold about $1 trillion in DC assets.