The RIA M&A Market Is Hot — But Buyers Are Still Walking Away

Misaligned valuations are the biggest deal killer, says Fidelity.


Illustration by RIA Intel

Despite high valuations, larger deals, and a 200 percent jump in RIA M&A activity, more than half of the potential buyers have walked away from evaluated deals between 2020 and 2023.

A new report by Fidelity surveyed serial acquirers involved in nearly 500 deals over the last three years, which accounted for about 75 percent of all RIA transactions tracked by Fidelity during that time.

Fidelity found that interest in acquiring RIAs has skyrocketed. Between 2020 and 2023, Fidelity tracked a reported 492 deals, up from the 146 reported between 2017 and 2019, a 237 percent increase. Additionally, the median AUM of acquired firms increased from $250 million to $400 million. The last time Fidelity conducted this study was in 2019.

“It’s been a few years since we’ve done the study, and the M&A marketplace is changing. There’s [been] so much activity, especially the past couple of years. It’s record-breaking,” Laura Delaney, Fidelity’s vice president of practice management and consulting, told RIA Intel. “What I love about this study is that we’re able to have trend data, to see where we started and where we are now.”

Despite the rise in acquisitions and the record-breaking activity, Fidelity found that buyers have actually walked away from the majority of deals.

Different views on deal valuations was the number-one reason buyers walked away, with 83 percent of serial acquirers choosing it. Other key drivers were mismatched cultures and misalignment with the firm’s vision.

According to the report, the key drivers influencing sellers to overvalue their businesses were unrealistic comparison multiples (83 percent), a lack of understanding of valuation drivers (77 percent), and being too close to the business to see weaknesses (47 percent).

Patrick Lawlor, head of M&A at Savant Wealth Management, a $20 billion AUM RIA, said that most buyers use a sophisticated model to evaluate a potential acquisition.

“We have a model that looks at probably 25 different things. It could be the growth of the firm, it could be the location of the firm, it could also be related to the demographics of their clients — for example, if a firm has a lot of older clients who are just pulling money out, that’s not going to be as attractive as a firm that has clients in their early ’60s who are adding money,” Lawlor said.

For the most part, Savant’s valuations tend to align with the firms it acquires. Lawlor said Savant has walked from about 30 percent of the companies it has evaluated, and that over-valuation was the key driver of a deal not working out.

However, despite these issues, M&A demand for RIAs remains strong. Three in five acquirers surveyed by Fidelity said that they plan to do more deals in the next five years. Savant, for example, is on track to complete 10 deals this year, up from three or four in previous years.

And with more than a third of all advisors, representing $11.9 trillion in assets, planning to retire over the next decade, many firms will be up for grabs. According to the wealth management research firm Cerulli Associates, 31 percent of independent RIAs are planning to sell their business as part of their succession plan. This is higher than any other wealth management channel. Comparatively, only 21 percent of independent broker-dealers and 1 percent of wirehouses say they plan to sell as part of their succession plan.

According to Fidelity, the number-one driver of buyer interest in M&A is to acquire top advisor talent (90 percent). Additional reasons include the desire to enter new geographic markets (60 percent) and buyers who want to grow their share of assets (50 percent).

“When you’re at a growing firm, you constantly need good young talent, and there aren’t as many of them coming into the industry. A lot of people in our industry are going to be retiring in the next five or 10 years — that’s why there’s so much M&A going on,” Lawlor said.

On the other hand, sellers were primarily motivated by their desires to reduce operating duties and focus on client needs (77 percent) or achieve full or partial liquidity for the owner(s) (70 percent). Others wanted to sell because they didn’t have a viable succession plan (40 percent).

Delaney said that it’s really important for buyers and sellers to understand each other’s motivations when they come to the negotiation table.

“It’s about ‘how do we align?’” she said. “M&A should not be looked at as a market-timing activity. I think that M&A should be looked at as good reason to make the best decision for your firm and for your clients,” said Delaney.

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