There are some signs that the fast increase in valuations of wealth management M&A transactions is decelerating.

Valuations for wealth management firms in merger and acquisition deals are rising but at a slower pace with buyers becoming choosier, figures on the US sector show.

The numbers, from Advisor Growth Strategies, come after several years of strong M&A activity in the space.

Median valuations in 2021 rose to just shy of a 9 times multiple of an independent firm's EBITDA [earnings before interest, taxation, depreciation and amortization], the firm’s Deal Room study showed. This study covered 51 transactions, more than half of which come from firms with more than $1 billion in assets under management.

The EBITDA figure has risen 12 per cent  in 2021 from 2020, not quite as high as when the figure rose 21 per cent in 2020 from 2019, which in turn had logged a 29 per cent rise.

M&A activity has been strong, as illustrated by firms such as Hightower, CI Financial, Mercer Global Advisors, Merchant Investment Management and other prominent acquirers. Much of the action has been among registered investment advisors, with fewer deals on the side of multi-family offices (although some MFOs are regulated as RIAs). Examples of the latter include Tiedemann Advisors’ purchase last year of UK-based Alvarium to build an international MFO. Other MFO deals have included the Tiedemann M&A transactions (Presidio and Threshold); Pathstone (Federal Street, Convergent, Cornerstone) and Fiduciary Trust International (Athena Capital Advisors).

The report said the average transaction is broken down as follows: 77 per cent cash, 21 per cent equity, and 2 per cent contingent payments.

Major acquirers accounted for 69 per cent of all deals last year, but they aggressively pursued less than 25 per cent of their potential transactions.

This publication has examined the role that private equity has played in the M&A story.