A “Down Year” for RIA M&A: Devoe

Registered investment advisor M&A activity remained sluggish in the third quarter and the record number of transactions from 2022 is unlikely to be surpassed by the end of the year, according to a new report.

The third quarter saw 65 transactions, fewer than the 68 reported in the third quarter of 2022, according to a new report by consulting firm DeVoe & Co. The report considered only deals involving firms with $100 million or more in assets and did not include advisors transitioning between firms.

The industry has seen 185 transactions so far this year, down from 203 during the same period in 2022.

While DeVoe deems this level of M&A dealmaking to be “healthy,” the report indicates that activity would have been much higher if not for elevated interest rates, macroeconomic uncertainty, and stock market volatility.

“With Q3 being yet another down quarter, the likelihood of 2023 being a down year is calcifying into a reality,” wrote DeVoe.

DeVoe is not entirely pessimistic, as it believes the industry may be enduring a temporary slowdown.

“Without a dramatic change, 2023 will be the first down year in M&A activity in nearly a decade. That’s okay,” the company reported.

Despite the “somewhat boring period” in M&A, recent activity is likely to generate busier periods in the future. DeVoe cites capital injections into acquirers such as Mercer, Captrust, Wealth Enhancement Group, and Prime Capital, as well as the acquisition of Focus Financial Partners’ Personal Financial Management division by Creative Planning.

In the meantime, acquirers appear to have regained their appetite for larger RIAs: after a slowdown in 2022, the number of mergers involving firms with more than $1 billion in AUM increased 10% this year, accounting for 37% of the transactions year-to-date, according to DeVoe.