M and A

Wealth Management M&A Volumes Seen Rising; Private Equity Dominates Deals

Tom Burroughes Group Editor April 24, 2024

Wealth Management M&A Volumes Seen Rising; Private Equity Dominates Deals

A regular report on how vigorous the merger and acquisitions market is for North America points to a gentle rise in expected transactions this year; it also notes the dominant role of private equity.

The volume of wealth management M&A deals in North America should rise moderately this year, ECHELON Partners predicts, as its latest quarterly report shows 90 announced deals in the first three months of 2024, rising 20 per cent on a year before.

The Q1 2024 figure was the second most active first quarter on record, the firm, which advises wealth managers on mergers and acquisitions, said in its report, issued yesterday. 

While registered investment advisors continue to dominate the overall wealth management buyer population makeup, this quarter’s largest transactions included a diverse group featuring RIAs, private equity firms, broker dealers, asset managers, and insurance companies. LPL Financial announced the largest deal of the quarter, acquiring $100.0 billion Atria Wealth Solutions in February 2024. Other notable large transactions include Mariner’s acquisition of $90.0 billion AndCo Consulting and Focus Financial Partners’ acquisition of the management stake of $30 billion affiliate SCS Financial. 

Looking ahead, ECHELON predicts that 330 deals will be announced this year, up from 321 transactions in 2023.

A number of forces are pushing M&A, such as a desire by older wealth managers to retire; rising regulatory and technology costs that necessitate economies of scale; a desire by buyers to tap into multi-trillion-dollar wealth transfers to the "NextGen," and private equity firms' aim of putting cash war chests to work. Another firm advising deals, DeVoe & Co, also tracks the market. (See a recent article by US correspondent Charles Paikert.)

Private equity continues to be the dominant driver of deals, involved in 68.9 per cent of acquisitions in the quarter and contributing to more than $200 billion in assets contracted. Private equity houses involved in such deals included Flexpoint Ford, Allianz X, Constellation Wealth Capital, Charlesbank Capital Partners, and TRIA Capital Partners.

Minority transactions include Constellation Wealth Capital’s direct investments in Lido Advisors and Perigon Wealth Management. The quarter also saw several notable majority investments by private equity firms including Flexpoint Ford’s acquisition of the $80.0 billion AuM Public Trust Advisors and Charlesbank’s acquisition of UK-based Perspective Financial.

RIA assets increased relative to the last quarter, totaling more than $210 billion in Q1 2024. This marks a 13.1 per cent rise from Q4 2023, a lower deal count by private equity firms in the first quarter of this year.

Different types of acquirer
There are two main categories of buyers in the wealth management industry: Strategic and financial acquirers. ECHELON noted that strategic acquirers are firms such as RIAs and broker dealers that acquire firms to realize synergistic efficiencies, enter new markets, or to introduce new service offerings. Financial acquirers include private equity firms, family offices, holding companies, and similar investors who invest in strategies with a focus on generating returns rather than focusing on synergies.

In the wealth management industry, strategic acquirers have historically accounted for most transactions, though the most active strategic acquirers typically have at least one financial partner to contribute incremental capital for M&A.

In the first quarter of 2024, 85.6 per cent of all disclosed transactions were completed by strategic acquirers, who have announced 77 total transactions in 2024 year-to-date. Of the 77 deals announced by strategic acquirers in the first quarter of this year, 64.9 per cent involved firms with private equity backing. Financial acquirers announced 13 deals in Q1 2024, representing an 85.7 per cent increase over the previous quarter’s count. 

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