RIA M&A stumbles in the second quarter

investmentnews.com:

Merger and acquisition activity involving registered investment advisors saw a slight dip during the second quarter even as private equity investors continue to influence deal volume and valuations.

The latest report from Echelon Partners shows 65 transactions during the three-month period ending June 30, which compares to 75 deals during the prior quarter and 91 deals during the same quarter last year.

According to the report, “the relatively low volume this quarter is consistent with historical trends as the second quarter is typically the least active quarter of the year in terms of deal announcements.”

While deal activity has seen a gradual decline since peaking at 99 in the fourth quarter of 2021, Echelon reports that the recent quarter stands out as the second-most active second quarter on record.

“The market is still very active, but sellers are selling for slightly different reasons,” said Jim Cahn, chief investment officer and chief business development officer at Wealth Enhancement Group.

Cahn said the high point that occurred at the end of 2021 resulted from sellers “taking chips off the table” by getting deals done ahead of what were expected to be higher taxes under the Biden administration.

The driving force in 2023, he said, is a pursuit of scale.

“There’s starting to be more recognition among business owners that there will be some continued consolidation, and the benefits are obvious at this point,” Cahn said, adding that RIAs with less than $2 billion in client assets “are actively looking for partners.”

“The next wave of consolidation is really about who will have that technology to provide scale,” he said.

Wealth Enhancement Group, which has $70 billion under management, has announced seven deals so