Study: RIAs Still Selling amid Downturn

Merger and acquisitions (M&A) among registered investment advisory (RIA) firms has slowed, but firms are poised for resurgence, according to a new industry study.

The study, published by Pershing Advisor Solutions LLC, a BNY Mellon company, and FA Insight, said that, in 2007, a record 67 transactions occurred involving the merger or sale of an RIA with at least $100 million in assets under management. Through the first three quarters of 2009, 31 transactions have been recorded. That pace is on par with the 44 transactions for all of 2008, which represented a 30% decline compared to 2007.

The study noted a trend toward RIA-to-RIA mergers and a decline in serial buyers. RIAs transacting with other RIAs have become the most common deal type, accounting for 29% of all transactions year-to-date. The study said the trend will continue “as RIAs become more confident and more aware of the benefits that can be gained by pursuing a merger or acquisition with their own kind.”

Serial buyers, which accounted for 36% of all transactions in 2008, accounted for only a 26% share of deals in the first three quarters of 2009. The study attributed the trend to serial buyers narrowing their scope of what is a desirable acquisition. Furthermore, serial buyers are paying more attention to smaller firms, breakaway brokers, non-U.S. firms, and niche market specialists.

More than half of all serial transactions since January 2008 have been attributable to “synergistic buyers,” or buyers with long-term strategy in mind, as opposed to a desire for short-term gains.

The study also noted that banks shouldn’t be discounted; banks—particularly regional banks that were able to maintain healthy balance sheets—continue to remain active buyers of advisory firms. From January 2008 to September 2009, 18 deals were initiated by banks or trust companies, according to the study.

“Capital constraints, economic uncertainty and increased levels of caution characterize the current attitudes of marketplace participants and serve as a leading catalyst for slowing M&A activity,” said Mark Tibergien, chief executive officer of Pershing Advisor Solutions. “However, despite the current slowdown, industry M&A activity appears poised for a rebound. Advisory firm owners are interested in liquidity, serial buyers remain strongly committed to their longer-term acquisition strategies, and the pace of RIA-to-RIA mergers and acquisitions has increased.”

The study, “Real Deals 2009: Definitive Information on Mergers and Acquisitions for Advisors.” To receive a copy of the study, contact Pershing Advisor Solutions at 800.445.4467 or