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.
Average valuation for RIA sale jumps to 6.6x Ebitda
RIA valuations soared in 2019, according to a new report from Advisor Growth Strategies.
The RIA consultancy found in a new study, ‘The RIA Deal Room: The Next Generation of RIA M&A,’ that the median average earnings before interest, taxation, depreciation and amortization (Ebitda) multiple paid for an advisory firm jumped 29% in 2019, from a median of 5.1x over the course of 2015-2018 to 6.6x in 2019.
RIA M&A Activity Will Persist Post-Covid-19: Report
The coronavirus pandemic will certainly change the RIA M&A landscape, but recent growth in valuations and projections for how the industry will change suggest potential sellers will have more choice, according to a recent report.
Sixty-six percent of all RIA M&A deals in 2019 involved just 16 “acquisition brands,” compared to 13 in 2018 and 11 in 2017, Advisor Growth Strategies found. Meanwhile, $1.6 trillion in assets under management — and more than $20 billion in total valuation — is projected to “go into motion” in the next five to 10 years, according to AGS’ analysis of 2019 deals and a survey of RIAs conducted in early 2020 about valuation, business management and engaging in M&A. As more RIA owners look to exit, the industry will need more acquirers, AGS says.
The Forces Boosting RIA Valuations and Driving a Dramatic Shift in Deal Structure
Buyers and sellers of RIAs have begun heavily favoring cash to fund deals. But valuations have increased despite the immediate payouts to sellers, a sign of the growing prevalence and clout of large RIAs in the country.
In 2019, the average acquisition of one RIA by another was funded by 70% cash, 22% equity and 8% contingency (meaning a future payout would be determined by conditions agreed upon by the buyer and seller). That preference for cash represented a “large shift in deal structure,” according to a new report by Advisor Growth Strategies, a consulting firm to wealth managers.
Valuations Leap in RIA Deals, Reveals New Advisor Growth Strategies Study
The pandemic has impacted RIA M&A transactions, but increased competition and the need for succession planning that drove a blockbuster 2019 for deals have not gone anywhere, according to The 2020 RIA Deal Room study. Advisor Growth Strategies, one of the industry’s most trusted resources, researched 31 transactions that took place in 2019, surveyed 96 advisory firms and applied their own insights as leaders in RIA business management. With the support of their sponsor, BlackRock, Advisor Growth Strategies releases the most in-depth, quantitative study publicly available of why and how RIA industry deals succeed.