The pandemic era doubles as the dealmaking era for wealth management, and the past three years have played host to a flurry of M&A moves that leave previous eras in the dust.
But new research from Fidelity suggests that for every M&A success story, there is likely a tale of failure as buyers report walking away from the table more than half the time.
The 2023 Fidelity Investments 2023 M&A Valuation & Deal Structure Survey revealed a 237% increase in RIA mergers and acquisitions from 2020 to 2023. A reported 492 transactions took place during that period, up from just 146 deals in the 2017 to 2019 study period.
The survey, which examines trends and buyer perceptions related to RIA M&A transactions, also uncovered that the deals are getting bigger, with the median AUM of acquired firms increasing from $250 million to $400 million.
The second of its kind and the first conducted by Fidelity Investments since 2019, the analysis polled serial acquirers involved in nearly 75% of all RIA transactions tracked by the company from 2020 to 2023.
“Despite market headwinds, the wealth management industry continues to be a vibrant space for M&A, with the environment rewarding high-quality firms with strong multiples,” Laura Delaney, Fidelity’s vice president of practice management and consulting, said in a statement. “Although activity has increased substantially versus the previous study period, it’s important for RIA business owners to align on valuation drivers and understand the dynamics involved in the motivations and expectations of buyers and sellers.”
The research also revealed that when it comes to making a deal, buyers and sellers that end up at the negotiating table together are often brought there by very different motivations and expectations.
“If buyers and sellers can better understand each other’s key motivations, each can ensure they are effectively communicating the value their firm brings to the table,” the study says.
The Fidelity study was fielded between Feb. 13 and March 28, 2023, and covered M&A deals between January 2020 and March 2023. The 2019 study covered M&A deals between January 2017 and July 2019.
A total of 23 firms participated in the study. Scroll down to see more key takeaways from the research.