2020 M&A Dust Settles, Showing Another Record

The average deal size grew significantly, as new players have flocked to the retirement advisory and wealth management industry over the past year.

There’s no doubt about it: 2021 has gotten off to a rapid start for retirement plan industry mergers and acquisitions (M&As).

Already, several major deals have been announced, including Aquiline Capital Partners’ private equity backing of SageView Advisory Group and Truist’s sale of its recordkeeping and advisory businesses to the likes of Empower, Ascensus and OneDigital.

Amid the flurry of news, Echelon Partners has published its final 2020 M&A report, showing the year broke the record for annual deal volume. According to the analysis, the fourth quarter of last year delivered 69 deals (through December 22), which is a new quarterly record as well. In fact, Q4 2020 brought a 25% increase over Q3 2020, which previously set the quarterly high-water mark with 55 total deals.

Echelon’s analysts say this surge in Q4 activity helped to power another record-breaking year for retirement adviser and wealth manager M&A activity, with at least 205 deals registered for the year, compared with the 203 deals that Echelon reported in 2019.

“This is an impressive rebound, given the 162 total deals forecasted for 2020 at the end of Q2, which was the slowest period for M&A in roughly four years,” the analysis states. “2020 now represents the eighth consecutive year that the total number of deals in the RIA [registered investment adviser] industry has increased.”

As previously reported, the COVID-19 crisis and associated market downturn led to a temporary pause in many M&A processes during Q2. However, Echelon reports, once market conditions stabilized and dealmakers adapted to the new normal of Zoom and virtual management meetings, activity picked up—especially larger deals.

“Average assets under management acquired per transaction increased to over $1.8 billion in 2020, up 24% over 2019’s average of $1.5 billion,” the analysis explains. “This is the highest annual average to date.”

Echelon’s report notes that numerous new players have “flocked” to the wealth management and retirement plan advisory industry over the past year.

“Professional buyers continued their aggressive push to acquire high-quality RIAs, and the industry’s high profitability and steady cash flows are increasingly attracting new entrants and resulting in increased competition and higher valuations,” the analysis concludes.