RIA M&A off to a red-hot start

Mergers-and-acquisitions volume among RIA firms is running at a blistering pace so far this year, and it isn’t expected to slow down anytime soon.

Just last week, three major deals involving registered investment advisory firms were announced.

Aspiriant LLC, an RIA with $4 billion in assets, agreed to buy Deloitte Investment Advisors LLC, a unit of accounting firm Deloitte LLP, to form a $7 billion wealth management firm.

Silver Bridge Advisors LLC, a wealth manager with $1.7 billion in assets under management, revealed plans to purchase H&S Financial Advisors LLC, which has $400 million in assets under advisement.

And roll-up firm HighTower Advisors LLC acquired Three Bridge Wealth Advisors, an RIA that manages $740 million in assets.

The first half of the year was the strongest on record in terms of deal volume, with 40 completed acquisitions of RIA firms representing $30 billion in assets under management, according to The Charles Schwab Corp.

That is a record number of transactions for a first half, though the size of the average deal is smaller than in years past, said David DeVoe, managing director of strategic development at Schwab Advisor Services.

“The average seller is about half the size” of firms sold in 2008 and 2009, he said.

Since 2003, when Schwab began tracking M&A activity, transactions have been evenly divided among firms with less than $250 million in assets, those with $250 million to $1 billion and those with more than $1 billion. This year, however, 53% of transactions have involved firms with less than $250 million, Mr. DeVoe said.

Although it is uncertain whether M&A will surpass its 2008 peak, when 88 deals were completed, experts anticipate more consolidation this year. Mark Tibergien, chief executive of Pershing Advisor Solutions LLC, said that he is aware of about 20 RIAs that are discussing some type of combination, whether it be an outright acquisition or a combination of ownership interest.

Aspiriant chief executive Rob Francais said in an interview that the Deloitte acquisition fits with his firm’s strategy of expanding nationally.

“It’s a giant step forward for us in expanding our presence geographically — and expanding our talent, our capabilities — and aggregating client assets,” he said.

Along with helping firms ex-pand, other factors driving the increase in RIA deals include dwindling profitability for many firms following the 2008 downturn, succession planning and the need to provide better client service and achieve economies of scale.

“Many firms today are attempting to get to critical mass, that optimal level of profitability, productivity and capacity,” Mr. Tibergien said.

This time around, however, firms are being more selective about deals, said Elizabeth Nesvold, managing partner of investment bank Silver Lane Advisors LLC.

“M&A is rallying nicely,” she said. “We’re seeing some more things in the works, but it’s a shift from opportunistic shopping to strategic partnerships — people who want to be in a market, get access to a particular type of client or are trying to augment their service offering.”

For GenSpring Family Offices LLC, the largest RIA firm, with more than $20 billion in assets under advisement, potential deals are always in the offing.

“There are a lot more firms now that are open to discussions,” said Mike Holden, chief operating officer of GenSpring, an affiliate of SunTrust Banks Inc.

“We’re constantly having conversations with folks,” he said. “We’re in the marketplace opportunistically, looking for firms that share our values, philosophies, business model and are looking for a partner.”

Dan Jamieson contributed to this story.
E-mail Hilary Johnson at [email protected].

Related Topics: Mergers and Acquisitions