No Summer Lull for the Most Prolific RIA Buyers

Focus Financial, Mercer Advisors, Kestra, and others continue to keep deal volume at a record pace.

(Illustration by RIA Intel; Bigstock)

(Illustration by RIA Intel; Bigstock)

Big RIAs continue to dominate merger and acquisition activity, setting the pace for a historic year.

Even the final dog days of summer couldn’t slow things. In August, there were 11 deals involving RIAs managing a total of $7.4 billion. Although, to most of the buyers, there is no slow phase of the year. In some ways, last month was a representation of previous ones and probably many to come.

Focus Financial Partners, Mercer Advisors, Captrust, Kestra Financial and a firm affiliated with Dynasty Financial Partners all purchased at least one RIA in August and accounted for seven of the deals.

The concentration has been prevalent throughout 2018. Year-to-date, Mercer, Mariner Wealth Advisors, and Wealth Enhancement Group have each purchased four RIAs, respectively. Dynasty affiliates have acquired five others and Focus Financial accounted for 16 deals. Only 14 firms have done multiple transactions but those account for 51 deals out of the 86 total so far this year, according to a report published Thursday by Fidelity Clearing & Custody Solutions.

Deal volume is up 43% compared to last year. The average deal size has increased and pushing total assets under management transacted to $93.5 billion, up 68% from last year, Fidelity said.

Historically, deal volume has remained strong through the final quarter of the year. From 2014 through the first half of this year, the fourth quarter averaged 35.4 deals compared to an overall quarterly average of 36.9, according to Echelon Partners, a Los Angeles-based investment bank and consulting firm focused on wealth and investment managers.

As the number of deals continues to increase, Scott Slater, vice president of Practice Management & Consulting at Fidelity, said he expects deal volume to meet or surpass the average. Again, led by a group of familiar buyers.

“The strategic aggregators tend to have a clear strategy around M&A, and a clear plan for the platforms that they’re building. They are generally well-prepared when it comes to due diligence and identifying the right fit firms as they continue to grow and scale. I think we’ll continue to see significant volume in this space.”

Even within the strategic acquirers, there is some concentration. Buckingham Strategic Wealth accounts for four of Focus Financial’s 16 deals so far in 2019. Only two other affiliates have done more than one deal this year. The Colony Group has made three deals and Crestwood Advisors has made two.

As Focus Financial expands the number of partner firms – it currently has 63 – those firms are also doing more deals and helping it grow rapidly. Second quarter revenue jumped 30%, year-over-year, to $301.5 million, and fee-based and recurring revenues have nearly doubled since a year ago.

Correction: A previous version of this story stated that only two Focus Financial affiliates had made more than one deal this year. Three affiliates have done multiple deals.

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