Lower Rates to Boost RIA M&A Volume: Devoe & Co
Deal volume in 2024 is marginally above last year’s figures through the third quarter, indicating ongoing appetite for strategic expansion despite ongoing economic challenges, according to DeVoe & Company’s latest RIA M&A report.
The wealth management investment bank recorded 65 transactions in the third quarter, an increase from 61 in the second quarter, and comparable to the deal volume in the third and fourth quarters of the previous year and the first quarter of 2024.
That positions 2024 to exceed 240 transactions, in contrast to 251 M&A deals in 2023 and the peak of 264 in 2022, Devoe noted. It would place 2024 on par with the 241 transactions recorded in 2021.
The research emphasizes a significant tendency of larger sellers re-entering the market, specifically those overseeing assets of more than $1 billion. This sector has generated a substantial portion of transaction volume, as these companies are increasingly perceived as appealing targets for consolidators.
The Federal Reserve’s interest rates are anticipated to significantly enhance M&A activity, rendering purchases more economically viable for purchasers, according to the report. Reduced borrowing costs are expected to motivate both consolidators and independent registered investment advisors (RIAs) to adopt more assertive acquisition strategies, leveraging advantageous market conditions.
“The decreased cost of borrowing and piles of dry powder entering the RIA space should enable more dealmaking at a time when the industry is becoming more competitive,” the company wrote in the report. “Concurrently, industry demographics, investor demand and the need for talent and resources should continue to fuel M&A activity,”
Earlier this month, Echelon Partners reported a total of 74 transactions in the third quarter, encompassing mergers, acquisitions, and other dealings involving RIAs with over $100 million in assets under management, as well as individual financial advisors transitioning to different RIAs. The firm anticipates that this year’s total will surpass last year’s figures, marking the second-highest annual total ever documented by the firm.