3 Questions to Ask Before Jumping Into the Bull Market for RIAs
Despite the ongoing COVID-19 pandemic, many merger and acquisition opportunities in the RIA sector continue to emerge, according to several consultants and executives.
“Acquisition brands” — advisory firms that have done multiple transactions recently and have made M&A a key part of their growth objectives — are the ones to watch.
These firms “set the pace again in 2019” for M&A activity, said Brandon Kawal, principal of Advisor Growth Strategies, during a recent webcast.
Succession Planning Strategy: Convert to an RIA First
Last year, Goldman Sachs dropped a cool $750 million in cash for United Capital, the RIA founded by Joe Duran 15 years earlier. This deal represented further proof the M&A market has been heating up, to say the least. A recent report from RIA consultancy Advisor Growth Strategies showed a 29% year-over-year increase in the EBITDA multiple paid for advisory firms last year. More specifically, the multiple jumped from a median of 5.1x (in 2015-2018) to 6.6x last year.
The global coronavirus pandemic has slightly slowed the pace of dealmaking in recent months, per this Fidelity report, but experts remain optimistic about valuations and dealmaking, particularly since so many buyers have a good bit of cash on hand. The pandemic is also accelerating succession plans because it’s increased the amount of uncertainty in the market.
PagnatoKarp learns going it alone has its limits, jumps into the arms of another serial buyer, Cresset, after declaring its independence from HighTower only four years ago
Advisors Paul A. Pagnato and David W. Karp have figured out independence isn't all it's cracked up to be, especially when it comes to succession and tapping into the capabilities of a larger firm.
The $2.2 billion Reston, Va., RIA has just jumped into the arms of Chicago-based Cresset Asset Management after fleeing Merrill Lynch in 2011 for HighTower Advisors LLC -- also a Chicago-based roll-up -- and then going it alone as PagnatoKarp in 2016. See: Fearless Merrill Lynch team breaks away with $1 billion in broad daylight
Cash Deals Rising in RIA M&A
Two of the industry’s most prolific acquirers said on a webinar Tuesday that the meteoric rise in valuations which began in 2019 is showing no signs of slowing in the face of the pandemic, while cash considerations are now the dominant characteristic of deal structures.
The webinar, entitled Fact Versus Fiction: Investigating the “Truth” in Deal Structures, was hosted by RIA management consultant Advisor Growth Strategies and sponsored by BlackRock.
Fidelity reports three slowest months of RIA M&A on record
A new report from Fidelity has put the coronavirus pandemic’s effect on RIA dealmaking in full, bleak view.
According to the RIA custodian’s wealth management transaction report for May, there have been just 30 transactions in the industry through the first five months of 2020, a 45% decrease in the number of deals from 2019, when 55 mergers were completed in that span.
Cash reigns as king in RIA M&A deals
Mergers and acquisitions in the registered investment adviser industry were dominated by cash transactions last year as buyers favored such deals over more expensive and risky equity capital amid historically low interest rates.
M&A activity showed a shift away from equity in 2019, according to the 2020 RIA Deal Room study released last Thursday by Advisor Growth Strategies.