RIA M&A Activity Off to Strong Start: DeVoe
Mergers & acquisitions activity in the registered investment advisory space continued its upward momentum in the first quarter of 2024. The volume of deals was up 3% year-over-year, with 65 transactions compared with 63 transactions in the fourth quarter of 2023, marking two consecutive quarters of growth, according to DeVoe & Co’s latest RIA M&A Deal Book.
In 2023, deal activity dropped for the first time in a decade, but DeVoe stated that the two most recent quarters of rising momentum indicate the RIA space “has entered a period of sustained stability.”
According to the report, private equity investments increased in the first quarter, as did smaller firm sales, while larger RIA sellers, those with $1 billion to $5 billion in assets under management, accounted for only 18% of the deals year-to-date, down from 24% in 2023.
DeVoe also predicts “ongoing challenges” to firms’ succession planning — only one-fifth of advisors polled are confident that next-generation leadership can afford to buy the firms, down from 39% in 2020 — and expects more firms to sell outside the organization.
“As the shifting competitive landscape and value propositions of major buyers continue to draw more RIAs into discussions about selling, DeVoe & Co. expects that deal activity in 2024 will exceed 2023,” DeVoe wrote. “Ongoing succession challenges and consolidation at the top of the industry are expected to drive increasing transaction volume for the next five or more years.”
DeVoe thinks that this year’s volume will exceed 251 transactions in 2023.