Small And Midsize Firms Fuel Record Year-To-Date M&A Volume While Consolidators Remain Dominant But Lose Steam, According To DeVoe & Company
DeVoe & Company’s third quarter report on the state of mergers and acquisitions in the RIA space reveals that deal flow stayed steady throughout the first three quarters of 2022, although the pace of activity has fallen somewhat. Here are the top five points from the Q3 2022 Capital Group / DeVoe RIA Deal Book.
1. Overall Q3 had 68 transactions, on par with the 67 deals in Q2 and 68 deals in Q1. In Q4 2021, 76 transactions occurred after quarterly deal volume trended upward throughout the previous two years. On the plus side, during the first three quarters of 2022, firms conducted 203 transactions, 23% higher than the same time period last year, according to DeVoe.
2. Small and midsize firms fueled that record deal volume, with RIA sellers under $1 billion in assets under management (AUM) accounting for 142 transactions, up 54% from the same time period in 2021. In fact, 93 of the 203 transactions involved sellers with $100 million to $500 million AUM, which already eclipses the 88 deals for that group during all of 2021, DeVoe found.
3. Consolidators conducted 52% of all transactions in the first three quarters of 2022, compared with 54% of deals during all of 2021. DeVoe attributed the slip among consolidators to lower quality firms coming to market. In Q3, Mercer Advisors, Mariner Wealth Advisors, Merit Financial Advisors and Wealth Enhancement Group conducted three or more acquisitions.
4. Sub-acquisitions also soared to a new record, with 40 such transactions occurring during the first three quarters of 2022 compared with 38 sub-acquisitions in all of 2021. Sub-acquisitions accounted for 20% of total transactions during the first three quarters of 2022, up from 16% in all of 2021 and 2020 but still below 22% of deals in 2019 and 23% in 2018, according to DeVoe.
5. According to industry players at the DeVoe M&A + Succession Summit, many sellers make the mistake of coming to market before properly understanding their own client data and buyers should do a better job of differentiating themselves to stand out to their ideal targets, while both buyers and sellers must focus on becoming “the employer of choice” to recruit top talent.
For more information, download the full report here.
Chris Latham, Deputy Managing Editor at Wealth Solutions Report, can be reached at clatham@wealthsolutionsreport.com
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