Financial Services & Technology
Q3 2024 WEALTH MANAGEMENT M&A QUARTERLY REPORT
Wealth Management M&A Summary
Recent Wealth Management M&A activity in Q3 2024 exhibited the following nascent trends:
Rising Median AUM Deal Sizes in Wealth Management
The size of acquired firms is steadily increasing, with the median AUM rising from $341 million in Q3 2023 to $530 million in Q3 2024 - a 55% jump
As of Q3 2024, 35 % of deals involved firms with AUM between $250 million and $750 million
Market appreciation and organic growth have been the primary drivers of larger deals
Emergence of Private Equity (PE) Backed RIA Acquirers
The rise of PE-Backed RIA Acquirers is a significant catalyst for M&A activity
As competition intensifies, independent RIAs are drawn to these models for the support, resources and capital they provide, although they must carefully navigate the desire for autonomy versus the benefits of centralization
Examples like Creative Planning and Mariner illustrate how absorbing smaller firms can enhance operational efficiencies while maintaining the entrepreneurial spirit of the RIA model
Targeting High-Net-Worth and Ultra-High-Net-Worth Clients
The growth of high-net-worth (HNW) and ultra-high-net-worth (UHNW) segments has represented a significant opportunity
Cerulli Associates estimates that nearly two-thirds of US asset growth since 2011 has been in the HNW and UHNW markets
While wirehouses and private banks have traditionally dominated the HNW and UHNW markets, independent firms have shown strong growth in these segments
M&A activity is increasingly focused on firms that can effectively serve affluent clients
Scale and Profitability Imperatives
Acquirers are increasingly motivated by the need to enhance scale and profitability
The industry has witnessed a decade-long trend of consolidation, where acquirers aim to grow through acquisitions that expand AUM, advisor headcount, and geographic reach
By achieving greater scale, acquired firms can also leverage economies of scale across critical operations such as technology, infrastructure, and regulatory compliance, allowing them to remain competitive in an evolving landscape
Wealth Management Deal Activity
Deal Volume & Median AUM by Quarter
Number of Deals Median AUM
Two Key Takeaways
1. Deal Pace Remains Strong & Steady
The Wealth Management M&A market remains strong, with 51 transactions completed in Q3 2024 & 159 for YTD Q3 2024
35% (or 56) of deals YTD involved firms with AUM between $250 million and $750 million, a major segment that continues to drive activity
The median firm size increased from $341 million in Q3 2023 to $530 in Q3 2024, a 55% increase, reflecting the impact of both market drivers and organic growth
2. Private Equity Backed Acquirers Continue to be Dominant Partners
Private equity-backed acquirers continue to play a pivotal role in the market, accounting for 77% of acquisitions YTD
Private equity's strong presence highlights the attractiveness of the wealth management space, supporting steady and robust deal volume
Wealth Management Acquirers
As of Q3 2024, Private Equity-Backed Strategic acquirers have acquired ~$45 billion in AUM, accounting for 77% of total deal volume
A significant factor driving this trend is that smaller RIAs, particularly those with AUM between $250 million and $750 million, are attracted to the support and resources offered by financially-backed strategic firms
Recent
Current Trends in Wealth Management Deal Structures
Illustrative 3-Part Deal Structure
Additional upside structured around performance metrics
Contingent consideration usually paid out after 12-24 months
Typically, based on revenue and/or client retention targets
Paid at Close
Typical cash/equity mix can range from 60/40 to 80/20
Evolving Dynamics in Wealth Management M&A
Focus on Upfront Cash
In wealth management, M&A continues to comprise majority of deals, offering founders immediate liquidity
This approach can limit sellers' participation in long-term growth, prompting acquirers to sometimes blend cash with equity to ensure alignment
Retention-based Earnout
Retention-based Earnouts have become crucial in deal structures, accounting for ~20% to ~30% of upfront consideration
These earnouts typically address concerns about client, revenue, and advisor retention
Additional Consideration
Additional Consideration can offer sellers potential additional upside, enhancing the attractiveness of a deal and serve as competitive differentiators for acquirers
Q3 2024 Wealth Management M&A Transactions
Q3 2024 Wealth Management M&A Transactions
Q3 2024 Wealth Management M&A Transactions
Deal Volume by Firm AUM Size Q3 2024 YTD
Wealth Management Transaction Spotlight1
acquired by
AUM: ~$700 million
Location: Dallas, TX
No. of Advisors: 3
Deal Date: July 1, 2024
“It was serendipitous that they were in the Dallas market…When you find great people who you think fit culturally, who have good skills as advisors, they think like entrepreneurs and they can bring scale to a geographic area, that’s a win in our book.”
Ryan Parker EP Wealth CEO
Acquired AUM Reflective of Median Deal Sizes
Sloan Investment Management added ~$700 million in AUM to EP Wealth’s portfolio, pushing EP’s total AUM in the Dallas region beyond $1 billion and the firm's national AUM to $25 billion
This is EP Wealth’s fourth acquisition in 2024 and it underscores the growing size of deals in the industry as acquirers seek to expand their AUM with larger firms
PE-backing Fueled M&A
EP Wealth Advisors, backed by private equity firms Berkshire Partners and Wealth Partners Capital Group (WPCG), has now completed 32 acquisitions since taking on a minority investment from WPCG in 2017
The private equity backing enables firms like EP Wealth to pursue scale, profitability, and sustainable growth, driven by access to capital and strategic guidance
Emphasis on High Net Worth (HNW) Clients
Sloan Investment Management had built its reputation by serving HNW clients
The firm’s proprietary approach to managing client portfolios, which included a focus on “post-modern portfolio management,” appeals to HNW investors who prioritize a long-term, personalized approach to wealth management
Buyers’ Focus on Scale and Profitability
EP’s CEO, Ryan Parker, emphasized the importance of finding firms with “good skills as advisors” and an “entrepreneurial spirit,” which can “bring scale to a geographic area.”
Sloan’s established client base, local market expertise, and established team of three advisors and administrative staff made it a strategic fit for EP Wealth
About Harbor View Advisors
Operating at the intersection of investment banking and management consulting, we partner with inspiring companies and private equity firms to help them design and execute their strategies for growth or exit. With decades of successful client outcomes, we help growing teams improve their opportunities for success. We provide Sell-side advisory, Buy-side advisory and Strategic Consulting to innovative companies and financial sponsors.
The material in this report is for information purposes only and is not intended to be relied upon as financial, accounting, tax, legal or other professional advice. This report does not constitute and should not be construed as soliciting or offering any investment or other transaction, identifying securities for you to purchase or offer to purchase, or recommending the acquisition or disposition of any investment. Harbor View Advisors does not guarantee the accuracy or reliability of any data provided from third party resources. Although we endeavor to provide accurate information from third party sources, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.