ECHELON 2022 RIA M&A Full Report: Wealth Management Defied Global M&A Slowdown

RIAs Regained Some Market Share, Wealthtech M&A Fell Off And Private Equity Is Sitting On Record Dry Powder, According To ECHELON

This week ECHELON Partners followed up its 2022 brief from January with a full report on the state of RIA-related mergers and acquisitions in 2022.

“The wealth management industry experienced another surge in M&A activity in 2022, marking the tenth consecutive year of record deal totals,” Dan Seivert, Managing Partner and CEO at ECHELON, said in the report. “However, the total number of transactions only provides a partial picture of what’s happening in the wealth management M&A ecosystem.”

The new report reveals that wealth management activity avoided the broader M&A market slowdown that occurred due to rising interest rates, geopolitical uncertainty and tightening monetary policy. Instead, wealth management buyer competition stayed high and sponsor-backed consolidators continued deploying capital, which helped transaction volume.

However, wealthtech endured a bumpier environment, when the record pace of the first half of 2022 gave way to a steep fall. Fintech transactions fell approximately 8% globally year-over-year, prompting wealthtech deals to fall from 108 to 96, by 11.1%, after a record 2021, but still at double the number of deals as in 2020. 

Here are some other new findings from the 2022 ECHELON RIA M&A Deal Report:

1. Last year’s 341 total announced wealth management transactions represented year-over-year growth of 11.1%, following the 49.8% deal volume increase of the 2020 to 2021 time period, according to ECHELON. Yet transaction volume fell each quarter in 2022, from 94 deals in Q1 to 71 in Q4.

2. ECHELON reported that the average 60/40 portfolio returned approximately -17% last year, causing many firms to suffer negative net new asset flows. This market turbulence triggered a large portion of the decline in $1 billion-plus asset transactions. A market recovery could see targets acquired last year soon return to asset levels that surpass $1 billion. 

3. RIAs regained some market share in 2022, accounting for 28.2% of all transactions, after a 15% decline in 2021 when strategics and consolidators regained the majority of market share. Smaller average deal size helped RIAs in transactions when sellers were close to buyers and in deals with high potential for cost synergies, according to ECHELON.

4. Turbulent public markets, geopolitical uncertainty and tightening debt markets kept many buyers across the broader market from acquiring and investing in firms last year. As a result, private equity firms could deploy $9.8 billion to $29.4 billion across the wealth management space in the coming years, ECHELON found.

For more information, download the full report here.

Chris Latham, Deputy Managing Editor at Wealth Solutions Report, can be reached at clatham@wealthsolutionsreport.com