Evening Brief – 07.24.23
M&A activity in the registered investment advisory space slowed in the first half of this year, indicating that 2023 is unlikely to be “another blockbuster year,” according to San Francisco-based consultant DeVoe & Co.
There were 57 transactions recorded in the second quarter of the year, a 9% decrease from the previous quarter and a 15% decrease from 67 in the same quarter last year, according to DeVoe’s recent Deal Book report. The six-month total of 57 represented an 11% decline compared with the same period the prior year.
Devoe & Co. assigned the sluggish pace to the “timid” nature of buyers and sellers as the sector was hindered by macroeconomic conditions such as high inflation and borrowing rates.
According to the research, second-quarter M&A activity showed that the industry may experience its first yearly fall in nearly a decade; however, a possible drop in activity should not be reason for alarm.
“The large wave of M&A volume that’s been flowing through the industry is just a bit lower than it was last year,” DeVoe said in the report. “It’s still a very active marketplace. I would characterize it as a healthy amount of M&A activity.”
The slowdown in transactions may prove beneficial for advisors to fully evaluate their channels for growth, said DeVoe.
“This breather that’s been happening over the last couple of quarters has allowed advisors to take a perhaps more balanced view of their options and think more strategically about what is best for them,” said DeVoe.
Despite this, acquirers remain optimistic about their performance for the rest of the year. Approximately 40% of big acquirers polled expect they will maintain their historical transaction volume in the next six months, while 53% predict they will raise their transaction volume in the second half of the year.
The most active consolidator during the first half was Wealth Enhancement Group, at seven deals, followed by Merit Financial Advisors with six; Captrust, Cerity Partners, Beacon Pointe Advisors and Hightower all closed five deals each.