Schwab Says RIA M&A Deal Size Increased in 2011

Schwab Advisor Services data on registered investment adviser (RIA) mergers and acquisitions activity for the first half of 2011 shows M&A activity is down from 2010, but deal size is greater.

According to the data, there were 27 M&A transactions involving RIAs, representing approximately $20.8 billion in total assets under management (AUM) acquired in the first two quarters. The AUM for the average deal during the first half of 2011 was $770 million. In contrast, the first half of 2010 yielded 30 transactions representing $12.4 billion in AUM, with an average deal AUM of $412 million.  

“Thus far in 2011, we’ve seen a significant leap in the average deal size due to a greater proportion of those with $1 billion or more in AUM, despite a slight decrease in transactions over the same period last year,” said David DeVoe, managing director of strategic business development for Schwab Advisor Services, in a press release.   

The 12 deals in Q2 2011 represented $13.2 billion in AUM and represented a decrease in deals from the 14 deals with approximately $8 billion in AUM reported in the same quarter in 2010. Average deal size increased: the 12 deals tracked by Schwab in Q2 of this year had an average deal size of $1.1 billion, versus $571 million in Q2 of 2010. The dominant buyer category continues to be RIAs which conducted 12 transactions in 2011.  

“RIA's themselves continue to be the dominant buyer category, demonstrating their growing sophistication in mergers and acquisitions,” added DeVoe. “It also shows RIAs’ willingness to use M&A as one way to achieve business goals and objectives.”   

In Q2 2011, Schwab issued M&A data based on an updated methodology that provides a tighter focus on RIAs who directly serve the HNW client segment and removes institutional RIAs.  . Going forward, Schwab’s M&A data will focus on: firms that predominantly serve high-net-worth retail investors, firms with at least $50 million in AUM, and  breakaway brokers from wirehouses who received consideration for joining an RIA.