Private Equity Dominates Wealth Management M&A Activity

Private equity is the “new, prominent player” in the M&A industry, as it private equity-backed deals made up 89% of all transactions during 2024, up from 39% five years earlier, according to a report from Fidelity Investments that tracked and analyzed M&A deals from 2015 through 2024.

“Private equity continues to fuel our industry,” the report stated. “Private equity continues to be attracted to the appetite for financial advice, coupled with the steady stream of fee-generated cash flow and the opportunity to capitalize on the wealth transfer.”

For more stories like this, sign up for the PLANADVISERdash daily newsletter. 

According to Fidelity’s research, April 2024 was the first month during which all registered investment adviser M&A transactions were backed by private equity firms, which occurred again in November and December. The report also noted that the number of minority-stake transactions in 2024 increased to 41 from 26 in 2023.

Fidelity stated that 2024 was a “record-breaking year” for wealth management M&A deals, surpassing 2023’s total by six deals. Deals worth more than $1 billion accounted for 35% of all transactions, up from 29% the previous year, while the median value of the transactions for the year was up 28% to $536 million, compared with the previous year.

Over the 10-year period, the number of registered investment adviser M&A deals surged to 233 in 2024 from 89 in 2015, which is a 14% compound annualized growth rate over 10 years, according to Fidelity. The value of purchased assets increased more than fivefold to $669.8 billion from $130 billion, while the median deal size grew to $536 million from $500 million during the period.

“Since Fidelity Investments began tracking transactions in 2015, we have witnessed profound change in the M&A space, including the acceleration of transactions, the size of deals, and the players involved,” the report stated, adding that purchased assets for RIA and broker/dealer M&A deals totaled nearly $909.7 billion in 2024.

The report cited major private equity investments in RIA firms since Fidelity began tracking private equity in wealth management M&A in 2016. Notable transactions included KKR and Stone Point Capital’s investment in Focus Financial, which went public in 2018 before being taken private again by Clayton, Dubilier & Rice in 2023. The report also cited Thomas H. Lee Partners’ investment in Hightower in 2017 and Oak Hill Capital and Genstar Capital’s 2018 investment in Mercer Advisors, among others.

“With the typical PE hold period described to be five to seven years, we may be experiencing a third wave of PE capital entering our industry” over the past 10 years, the report said. “Conversations with strategic acquirers and private equity stakeholders suggest that while PE is typically not expected to be forever capital, PE has expressed willingness to invest a bit on the longer end of the hold period.”

The Fidelity report also projected an increase in first-time acquirers during the coming decade.

“An interesting question remains: what percentage of these acquirers will be backed by private equity?” the report stated. “Will there be a tipping point in the next decade of private equity taking a larger controlling stake in wealth management firms? And if so, could this be where the mega-merger is born?”

Tags

Reported by

Reprints

Please contact Industry Intel at Industry Intel.

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}