Full-year 2020 and the first quarter of 2021 was the busiest period in the history of retirement advisory firm M&A, according to Wise Rhino Group’s Retirement Advisory Firm Spotlight.
The report, which will be released on Tuesday, highlights the 33 retirement advisory firm deals closed in 2020 with another 22 closed during the first quarter of 2021.
This marked an increase over the 26 deals closed in 2019 and 13 deals closed in 2018—bringing the three-year CAGR to an astounding 36.4%. The report projects that 2021 will see an increase to more than 55 retirement advisory firm transactions, which would further increase the CAGR to 43.4%.
The acceleration of retirement advisory deals reflects many factors including increasing buyer demand and competition, strong deal terms, and improving buyer platforms and growth engines.
Since retirement advisory M&A began to heat up in 2018, there have been 26 different buyer firms that have closed at least one retirement advisory firm deal.
Acquiring firms cover a broad range of operating types from retirement RIAs, national insurance brokerage firms, regional insurance brokerage firms, private equity, wealth RIAs, broker-dealers, bank and investment firms, and affiliate platforms.
“The past three years, the firms that have had an aggressive, focused approach to inorganic growth have paced the industry with the CAPTRUST, HUB, OneDigital, NFP, and Marsh MMA’s of the world rapidly increasing in both operational scale and ability to acquire top firms,” noted Dick Darian, Founding Partner at Wise Rhino Group.
Last year saw several of the top retirement advisory firms seek partners, including CAPTRUST (GTCR), Sageview Advisory Group (Aquiline Capital Partners), Fiduciary Investment Advisors (NFP/DiMeo Schneider), and Resources/Affiliates (OneDigital).
Like the current deal multiples for wealth advisory firms and benefits and P/C firms, retirement advisory firm multiples have also hit record highs in Q1 2021.
“The number of total, elite buyers has increased as we entered the year,” added Peter Campagna of WRG. “Well-capitalized ‘new entrants’ like Sageview, fresh off their acquisition by Aquiline Capital, as well as numerous private equity players have begun making a major push and are now challenging the HUBs, One Digitals, and NFPs. We expect these multiples to remain at heightened levels until the demand and supply balance out.”
Also noted is the emergence of some uniform, key table stakes with which sellers have begun evaluating buyers. They include:
- A firm’s commitment to the growth of the retirement business,
- the background of leadership and vision for the company,
- the “Day One” experience transitioning into the culture of the organization,
- adjustment and efficiency of integrating into the acquirer’s platform,
- capital for growth,
- the strength of the acquirer’s brand within the C-Suite, and
- the opportunity that exists for role and career expansion.
Given the earnout structure of today’s deals, WRG stated that the “growth engine” presented by the acquirer plays a key role in the decision process for sell-side clients, increasingly focused on the participant for both the buyer and seller.
“We’ve seen an uptick in the value buyers are placing on the ‘middle business’ between retirement and wealth—with the approach to participant conversion a prime focus for both the seller and the acquirer,” WRG’s Rob Madore concluded. “The multiples placed on firms like CAPTRUST, arguably the most well-executed model at this point, are based heavily on the thesis that the future of the business is with the participant.”
FOR THE FULL Q2 2021 DEAL SPOTLIGHT VISIT: https://wiserhinogroup.hubspotpagebuilder.com/wise-rhino-group-rpa-ma-spotlight-q2-2021