The 2024 landscape for Mergers & Acquisitions (M&A) in wealth management is undergoing a significant shift, as highlighted in our recent report, 'US Wealth Management: State of the Industry'.
Despite a decline in overall M&A activities in 2023, the sector has shown remarkable resilience and continues to attract private equity (PE) investors. The Registered Investment Advisor (RIA) segment remains particularly active, with 251 deals in 2023 alone.
Stability and Growth Amidst Economic Uncertainty
While high interest rates and global economic challenges have dampened M&A activities in other financial sectors, wealth management has maintained its appeal. This stability is driven by the scalable and steady cash flow models of wealth management firms, making them attractive for PE sponsorship and succession planning.
Key Trends Shaping the Future
- Dichotomy in Add-On Activity
Some firms aggressively pursue add-ons, capitalizing on strategic expansions and opportunistic deals, while others focusing on integrating recent acquisitions and enhancing operational efficiencies due to less favorable financing conditions.
- Scrutiny in Large Platform Deals
High valuation multiples are reserved for firms demonstrating sustainable organic growth and diverse client bases, including younger generations.
- Increase in Advisor Lift-Outs
A surge in advisor lift-outs provides a streamlined acquisition process, often at lower costs than traditional asset purchases.
- Service Expansion
Firms are increasingly acquiring companies with complementary services, enhancing cross-sell opportunities and financial robustness.
- Geographic Expansion
Acquisitions are focusing on new wealth hubs and international markets, driven by demographic shifts and regulatory changes.
Looking Ahead
M&A activity is expected to remain robust, with consolidation trends likely among smaller firms, while larger firms may explore re-trading within the private market, seeking exits through sovereign wealth funds, or even merging to create mega-firms.
Originally published 17 July 2024
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