M&A Activity Rebounded Late in Q2

Fidelity finds June’s merger and acquisition activity represented over four-times more assets than the deals completed throughout March, April and May.

Fidelity has published new adviser industry merger and acquisition (M&A) volume data for the second quarter of 2020.

The firm finds the second quarter opened with some of the lowest M&A activity levels recorded since it began tracking in 2016. However, the quarter eventually turned around and closed with a deal count comparable to 2019’s record-setting pace.

“Not only was June 2020 one of the most active months since we began tracking M&A over four years ago, but we also saw significant client assets involved,” says Scott Slater, M&A specialist and Fidelity Institutional vice president of practice management and consulting. “I think the increase in the number of deals—and large ones at that—points to renewed energy around M&A after many firms took a pause at the start of the pandemic.”

According to Fidelity’s assessment, June’s 14 transactions averaged $1.5 billion in client assets under management (AUM) and restored the momentum kicked off in January and February, when there was an average of 10 transactions per month averaging $1.4 billion in client AUM. June’s client AUM total was $20.6 billion, marking the second highest number of deals in a month and the fifth largest monthly AUM total.

Slater says the first half of 2020 highlighted the interest that well capitalized investors have in minority stakes. During the first half of 2020, 11 registered investment advisers (RIAs) with over $1.0 billion AUM received minority investments.

“In addition to capital, many of these investors bring M&A sourcing and execution experience, and these types of transactions will contribute to creative M&A models,” Slater suggests. “The activity that we’re seeing illustrates that the driving forces of M&A—including substantial private capital, succession pressure, and the demand for improved platforms, scale, and talent—very much remain in the market.”

Some may have even been magnified by the pandemic, Slater says, as firms look to grow and scale while navigating new ways of working and evolving investor expectations.

“It’s not unrealistic to anticipate continued acceleration of M&A activity,” Slater concludes.