In a recent survey conducted by DeVoe & Co., 63 percent of Registered Investment Advisors (RIAs) stated they expect merger-and-acquisition (M&A) activity to continue to increase this year. Forty-seven percent of advisors said activity would rise somewhat, and the remaining 16 percent said it would do so considerably.
RIAs cited high valuations, the aging of firm founders, the proliferation of serial acquirers, and a variety of other reasons for increased merger and acquisition activity. The new findings are significantly different from those gathered in the early days of the pandemic. In the early days of the pandemic, 75 percent of respondents expected a decline in M&A activity, and none projected an increase in activity.
The pandemic accelerated M&A activity, according to the new report. DeVoe & Co. suggested that RIAs may expect well-financed acquirers to bid one another up or that synergies remain to be unlocked. The survey found appetite for acquisition increases with firm size. Approximately 90 percent of firms with upward of $3 billion indicated that they plan to acquire over the next two years. According to the report, many RIAs with between $3 billion and $10 billion feel constrained to expand their business. Several RIAs feel a need to compete with "META-RIAs." META RIAs are a group of two dozen mega-RIAs that will grow faster, operate more efficiently, and provide a wider variety of services than smaller outfits.
According to the survey, just 38 percent of firms with less than $500 million said they expect to acquire another RIA. The study pointed out that the driving factor for M&A activity is acquiring and retaining talent, which has become increasingly challenging. Among other priorities, half of the respondents cited expanding services and capabilities.
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