Merger and acquisition (M&A) activity among registered investment advisors (RIAs) hit 60-plus transactions in Q2, for a total of 126 transactions in the first six months of 2024, reported consulting firm DeVoe & Company.
According to the firm, 61 M&A transactions were announced in Q2 2024, a small decline from 65 transactions in the first quarter and an increase from 57 in the same period last year.
The number of quarterly transactions has lingered around 65 for over three years, while overall activity has grown 5% compared to the same time last year, largely driven by RIAs wanting to address succession planning, growth, and scale, along with a rise in new private equity-backed buyers, reports DeVoe & Company. In the first two quarters of 2024, 83 buyers announced transactions—a 26% increase compared to the first six months in 2023.
The firm also noted the influence of private equity-backed companies in the RIA industry, adding that close to three-quarters of all transactions completed so far in 2024 involved firms supported by private equity. This includes sub-acquisitions—where acquired firms also make acquisitions—and minority investments.
Specifically, small RIAs decreased their M&A activity while mega firms with over $5 billion in assets are tracking to have one of its best years yet. For the past 18 months, sellers under $1 billion in assets have comprised of 64% of total transactions and show signs of potential surging for the remainder of 2024. This group accounted for 18% of all transactions in the first two quarters of 2024, up from 13% in Q2 2023 and 14% at the end of 2023.
DeVoe & Company points to several reasons for the rise in mid-sized sellers. These sellers often sell at a discount, are relatively easy to integrate, and can provide a moderately sized office in a new market, the firm states.
Overall, these trends signal a steady and healthy pace in the M&A market, DeVoe & Company finds. “2024 is tracking towards a nominal increase in transactions relative to 2023,” the report states. “The lack of succession planning and the widening affordability gap for RIA next-generation [NextGen] leaders to buy out founders is expected to continue to drive external sales. Although 2025 currently appears poised for a slow but steady increase in M&A, various market, economic or political developments could alter this trajectory.”
Throughout the next decade, DeVoe & Company anticipates a continued increase in M&A activity, as succession planning intensifies, and competition increases. Furthermore, the eventual decline in interest rates could push for a more dynamic market.
“We anticipate the growing need for succession, the power of scale, and the threat of increasing competition will likely bring more sellers to the market over the next several years. Although there is no shortage of buyers today, when interest rates eventually decline, we expect well-capitalized buyers to become more active,” the firm concludes. “DeVoe & Company expects the convergence of these seller and buyer trends to drive M&A activity through the end of the decade.”