After a slow first half of 2023, mergers and acquisitions were higher than expected in the third quarter, according to a new report by Devoe & Company, a consultant and investment bank specializing in M&A and wealth management.
So far, 55 transactions have posted this quarter, a 4 increase over the same period last year.
“Given the steady slowdown in M&A activity over the last several quarters, this is a notable uptick,” David DeVoe, founder and CEO of DeVoe, said in a statement.
However, despite the increase, deal activity has been inconsistent.
According to the report, July and August were the most active months since January, with 23 and 27 recorded transactions, respectively. M&A in September has been slower, with only five transactions recorded through September 13.
This year’s transaction volume is trailing last year’s tally. According to Devoe, by this time last year, 188 transactions were posted, compared to 175 in 2023.
Over the past 12 months, high interest rates, an uncertain economic climate, and a volatile stock market have all caused a slowdown in deal-making. Overall, activity is 7 percent lower on a year-to-date basis than last year.
Despite the decline in M&A this year, the RIA market is still more active than before the pandemic. In 2019 and 2020, quarterly deal volume had a high of just 34 deals and 48 deals, respectively.
Devoe remains positive that over the long-term RIA deal volume will have an upward trajectory as “aging RIA founders,” who are retiring at a faster rate than new professionals are entering the industry, and an increasing interest in scale drive M&A activity over the next few years.
Private equity remains a key player in the space, with 75 percent of August’s transactions involving PE backing, according to Fidelity. Strategic acquirers also executed 60 percent of deals in August, representing 87 percent of purchased assets.
According to the report, only 18 percent of advisors are confident that the next generation can afford to buy out the founders. According to Cerulli Associates, the RIA channel represents nearly $3.7 trillion of potentially acquirable assets over the next decade, with $2.7 trillion coming from veteran advisors.