On the face of it, merger and acquisition activity among RIA firms for the first quarter of 2012 nationwide makes it appear that this year could be the biggest in a decade, according to numbers just released by Schwab.
However, nearly half of the
Veritable, the country’s third-largest RIA with
Schwab officials were not immediately available to explain breakdown the first-quarter data.
“The Veritable deal was quite large,” said one industry expert who preferred to not to be identified. “The rest is going to be a lot of little stuff. The others are glorified lateral hires. You have to bifurcate (the deals) into businesses and practices. Another way to describe it would be businesses and barbershops.”
The big numbers thus far for this year compares with
However, 2007 racked up the most value transacted in a year with
What is not in question is the fact that M&A activity has risen markedly in the past decade.
It is being driven by the need for scale among RIA firms who are hard-pressed to generate profitability in a market with increasing costs associated with compliance, technology and other factors. Furthermore, as an aging demographic of planners looks for profitable exits to fund their own retirements, the need for deep-pocketed partners will only increase.
Pointing to this trend, Schwab’s study also found that large national acquiring firms accounted for 53% of all deals in the first quarter of this year, versus 30% for all of 2011. That number has never been higher since Schwab first started tracking M&A activity.
By comparison the number of deals involving regional banks dropped to 8% of the total thus far this year versus a peak of 20% in 2010. National banks accounted for the most deals back in 2004, at 37%.
By 2011, national banks accounted for a mere 2% of deals. Even that low number was anomalous. Schwab’s numbers show no national banks acquiring RIAs between 2008 and 2010 and none so far this year.
RIAs themselves accounted for 35% of deals in 2012 thus far. That compares with high-water marks of 44% both last year and in 2009 and just 26% in 2004.
Ann Marsh writes for Financial Planning.
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