Driven by strong revenue and profitability, the number of
registered investment adviser (RIA) mergers and acquisitions (M&As) in the
first half of 2015 totaled 37 transactions, up 28% from 29 deals in the first
half of 2014, according to Schwab Advisor Services.
The value of the deals increased to $49.8 billion, up 53% from $32.6 billion in the first half of last year. The average deal size reached $1.3 billion in assets under management (AUM), the highest value since 2009, when deals averaged $1.7 billion. The types of buyers remained consistent with other deals, with strategic acquiring firms (SAFs) and RIAs accounting for 79% of the deals.
The Schwab 2015 Benchmarking Study also indicated that independent RIAs have experienced five years of strong performance. Forty-two percent have doubled their revenues and 50% have increased their AUM by 75% since 2009. The number of clients at top-performing firms increased by 10% or more, and the amount of assets managed from existing clients grew by 4%.
“The success of the RIA industry, buoyed by the impact of a six-year bull market, has helped increase valuations and put RIA firms in a place of competitive strength where they are well positioned to invest in growth,” says Jonathan Beatty, senior vice president, sales and relationship management, at Schwab Advisor Services. “Many firms report that they have doubled their valuations over the past five years. Some firms are leveraging that strength by choosing growth via merger or acquisition to achieve scale, enhance or fill gaps in capabilities, grow their client base, or to add talent and technological proficiencies.”