Non-public fairness capital continues to move into the unbiased wealth administration house; in truth, strategic acquirers (primarily non-public equity-backed RIAs) and monetary acquirers (primarily non-public fairness companies) accounted for about 85% and 15%, respectively, of the entire offers carried out within the third quarter, in response to Echelon Companions’ newest RIA M&A Deal Report.
There have been 74 whole RIA offers introduced within the third quarter, 63 of which had been carried out by strategic acquirers, that are “companies akin to RIAs and dealer/sellers that purchase companies to comprehend synergistic efficiencies, enter new markets, or introduce new service choices,” Echelon acknowledged. Of these 63 offers, 46% concerned patrons with non-public fairness backing. Yr-to-date, Echelon counted 241 offers, together with 205 by strategic acquirers and 36 by monetary acquirers.
Simply 11 offers had been carried out by monetary acquirers within the third quarter, however these offers represented $552 billion in acquired belongings beneath administration. (That excludes Bain Capital and Reverence Capital’s cope with Envestnet.) That features eight minority investments, together with Charlesbank taking a stake in Aprio and TPG’s investments in Homrich Berg and Artistic Planning. Echelon initiatives transaction quantity for minority offers to achieve 41 by the top of 2024. That compares to 35 minority offers in 2023 and 34 in 2022.
Yr-to-date, non-public fairness companies have made 33 direct investments and 122 oblique investments through non-public equity-backed companies. That accounts for about 64% of whole offers for the primary three quarters of 2024.
Total, the third quarter noticed 74 offers, in contrast with 75 within the second quarter and 90 within the first quarter. Although deal exercise remained stagnant between quarters, Echelon discovered “indicators for optimism,” together with that enormous acquirers continued elevating capital, with many indicating they had been closing offers on the finish of the quarter that may be introduced later this yr.
“The latest capital raises and strong 3Q24 efficiency are indicators of ongoing vendor provide and acquirer optimism,” the report acknowledged.
As of now, Echelon is estimating the entire variety of M&A offers to land at 330 for the yr, exceeding 2023’s 321 offers. In keeping with Echelon, a part of 2023’s decrease quantity stems from the Federal Reserve’s rate of interest hikes over the previous a number of years, resulting in a “momentary drop in deal quantity,” significantly an anemic second quarter of 2023.
“Expectations for a steady fee atmosphere started in late 2023, driving purchaser confidence and acquisition exercise upward. Now, with the primary of a sequence of rate of interest cuts formally in place, ECHELON expects an uptick in transaction quantity in 4Q24 and 2025,” the report learn.
Echelon additionally discovered the offers had been getting bigger in comparison with final yr, with 33 offers totaling greater than $1 billion, in comparison with 25 such offers in 2023’s third quarter, a 32% soar. Echelon expects the variety of $1 billion-plus offers to rise within the fourth quarter, as nicely, estimating about 130 whole such transactions. This might exceed 2023 and 2022, although it falls wanting 2021’s 145 offers exceeding $1 billion.