Frenetic Advisor M&A Moving Down Market - Barron's

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A rapid spate of deal-making has seen giant firms gobble up other large prey, leaving the industry with more whales and fewer minnows.

And “rather than go hungry, the predators are now snapping up smaller prey,” writes RIAIntel. “A recent report from TD Ameritrade found that 58% of all industry deals in the first half of 2019 were focused on firms that manage between $100 million and $500 million in assets.” In no previous year has this size range accounted for more than half of deal activity, noted the authors of the report.

“But you’d never know about this down-market trend by reading industry headlines,” RIAIntel writes. Example: Aggregator Focus Financial has made three large deals this year, but RIAs owned by Focus have inked more than 30 lesser deals separately.

The stepped-up pace of deal-making for smaller to mid-sized firms is the rare confluence of aligned interests. Buyers are ready to spend as they bulk up their base of advisors and clients to achieve scale economies, says RIAIntel. And there’s surely no shortage of motivated sellers. And many share a common trait: a lack of succession plans.

“Succession has emerged as a primary motivator for advisors as the workforce ages,” Cerulli analyst Ed Louis tells RIAIntel. He adds that 40% of all advisors will transition out of the field in the next decade.

-- John Kimelman

2019-09-18 01:37:00Z
https://www.barrons.com/articles/frenetic-advisor-m-a-moving-down-market-51568770632