ECHELON Report: Will 2022 Shatter M&A Records?

James Miller, Contributing Editor & Research Analyst, Wealth Solutions Report

2022 on Pace to Exceed 2021 Record Number of Deals, Deal Size Shows Slight Downtrend, Strategic Acquirers and Consolidators Still Dominate

Wealth management-focused investment bank ECHELON Partners will soon release its second quarter RIA deal report, and in advance of its release, shared highlights of the major trends it will detail in the upcoming report.

Chief among those trends, ECHELON predicts that full year 2022 is on track to break records in RIA M&A, with an estimated 308 total deals for this year, barely edging out 2021’s record of 307. Regardless of whether it tops last year, 2022 is shaping up to be a banner year for RIA M&A.

Adam Malamed, CEO, Ajax Investment Partners

What’s driving deal flow these days?

Adam Malamed, CEO of M&A advisory firm Ajax Investment Partners, agrees that RIA transactions for 2022 will finish strong – And for compelling reasons.

Anticipating a strong finish!

According to Malamed, “The continued strong pace of M&A deals in the RIA space shouldn’t be surprising to those who closely follow the wealth management industry.  Regardless of market volatility or rising interest rates, there are multiple macro-trends that will keep driving forward the pace and volume of RIA deals.”

These trends, in Malamed’s perspective, include the entry of more private equity firms into the wealth management space, combined with the widening gap between the numbers of financial advisors and retail investors who want and need professional guidance.

“The financial advisor has never been supplanted by robo-advice, automation solutions or do-it-yourself investing trends, contrary to what the usual industry doomsayers have said over the past decade,” said Malamed.  

“In fact, rising market volatility only increases the demand for services from wealth management firms, which will further feed dealmaking in the RIA segment from strategic and financial buyers.”

Deal volume breaking records, but deal sizes trending down

The second quarter of 2022 continued a downtrend from the first quarter, with 87 announced deals compared to 1Q’s 94, which also slowed from the 99-deal record-breaking fourth quarter of 2021. Despite the slowdown, 2Q22 broke the record for the highest deal volume of any second quarter.

Although deal volume is breaking records, the year-to-date average deal size of approximately $1.8 billion marks a downtrend from its peak of over $2 billion in 2021. “The number of larger transactions involving firms with more than $1 billion in AUM also declined, and they are expected to decrease by 17.9% in 2022 relative to 2021,” the firm says.

Strategic acquirers and consolidators continue to dominate the RIA M&A landscape, making 46% of all transactions, a number barely changed from 48% in 2021. The second largest group of acquirers fall into ECHELON’s “other” category, which includes insurance firms, broker-dealers and private equity.

According to the firm, “Significant transactions in the ‘Other’ category include Genstar Capital’s recapitalization of Cerity Partners, two acquisitions by Advisor Group (backed by Reverence Capital Partners), and Bain Capital’s and J.C. Flowers’ investment into $13 billion Insigneo Financial Group.”

Mitch Avnet, Founder & Managing Partner, Compliance Risk Concepts

ECHELON identified several trends in the data, including private equity firms continuing acquisitions overseas, wealth platforms raising debt for M&A purposes, active TAMP consolidation and IBDs acquiring smaller peers.

And what could be another key driver behind these trends?  Regulatory complexities and their associated costs.

Mitch Avnet, Founder and Managing Partner of consultancy Compliance Risk Concepts, points out that “Rising regulatory complexities make it increasingly necessary for many independent financial advisor businesses to plug into larger organizations that offer access to the best possible compliance risk management resources.”

Everything is being rolled up these days!

According to Avnet, this is generally a combination of both in-house and third-party solutions and expertise.

“With compliance and regulatory pressures remaining front and center in wealth management consolidation trends, the emphasis for firm leadership teams continues to be on striking the balance in being compliant, commercial and growth-oriented.”


James Miller, Contributing Editor & Research Analyst at Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com

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