Last month represented a significant milestone for M&A transactions in the RIA sector, with a record-breaking 39 transactions in the month, according to DeVoe & Company.
That was the highest monthly volume of RIA M&A transactions on record, surpassing the prior peak of 33 transactions in January 2021 and almost double the 21 deals in October 2023, the firm said Tuesday.
RIA M&A activity had grown 12% year-to-date through Friday versus the same period in 2023, DeVoe & Company said.
A total of 232 RIA M&A transactions have been finalized through Nov. 1 this year, up from the 208 transactions recorded through Nov. 1 in 2023, it said.
“The surge in October’s RIA M&A activity is a conspicuous spike following nearly three years of unremarkable activity.”
– David DeVoe, CEO and Founder, DeVoe & Company
“Although one shouldn’t read too much into a single month of data,” cautioned David DeVoe, CEO and Founder of DeVoe & Company, “the surge in October’s RIA M&A activity is a conspicuous spike following nearly three years of unremarkable activity.”
The vast majority of October 2024 transactions (83%) were done by private equity or private equity-backed acquirers, significantly above the 70% historical figure of the past few years, the firm said.
The declining cost of capital will likely result in more acquisitions overall, and the largest impact will likely come from private equity-backed consolidators (which the firm defines as serial acquirers with business strategies focused on growth through acquisition) and acquirers, the firm predicted in its Q3 2024 Deal Book.
The Deal Book also stated: “As the cost of capital decreases and debt service ratios improve, these firms will have more confidence to deploy capital. Essentially, the most active players in the marketplace will have the rationale to invest more aggressively.”
“Consolidators accounted for nearly 50% of announced transactions in October,” according to a news release.
Beacon Pointe, Cerity Partners and Waverly Advisors each announced three transactions in October, which DeVoe & Company pointed out was rare in the industry.
Since Q1 of 2021, M&A activity has remained in a “narrow band” of about 65 transactions each quarter, the firm said.
“DeVoe & Company recently predicted declining interest rates would likely drive up PE-backed buyer activity; it seems evident that these organizations were accelerating their activity in anticipation of the long-awaited rate cuts,” David DeVoe added.
Noting that the firm regularly recasts its projections, in a statement to WSR he said the October “surge” has impacted his firm’s forecast. “We currently project a total of 275 transactions at the end of the year,” he said, referring to the new expected total for all four quarters of 2024.
“We don’t believe the outcome of the election will immediately impact RIA M&A activity,” he added.
The DeVoe RIA M&A Deal Book focuses mainly on the M&As of RIAs – and only on transactions of $100 million or more in assets under management (AUM).
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jberman@wealthsolutionsreport.com.
