RIA mergers and acquisitions declined yr over yr for the primary time in no less than a decade in 2023, as greater rates of interest discouraged consumers, in line with a brand new report Thursday by DeVoe & Co.
For advisors trying to purchase or promote, the excellent news is that the general M&A market stays busy.
Offers additionally sped up within the fourth quarter of 2023, in line with DeVoe’s newest RIA Deal Ebook report. Sixty-six offers closed in that quarter, up 8% over the prior yr.
“Many sellers consider that the rate of interest atmosphere has compressed valuations,” the agency’s CEO and founder, David DeVoe, stated in an e mail to ThinkAdvisor on the examine. “Pausing any main strikes just isn’t unusual in instances of uncertainty or volatility.”
What to know: In 2023, the variety of deal closings fell 5% to 251, from the document 264 in 2022. As much as that time, the trade had seen 9 consecutive years of document deal quantity, DeVoe stated within the report.
Along with rates of interest, “different elements contributing to the slowdown included prolonged due-diligence processes, evolving deal constructions and a larger emphasis on the true worth of a purchaser’s fairness,” the report authors wrote.
Why it issues: Particularly, RIAs looking for to promote their apply internally face a succession disaster. The common advisor is of their 60s and growing older out of the occupation. However in 2023, solely 18% of next-gen RIA advisors had been perceived as with the ability to afford to purchase their corporations from the present homeowners — down from 38% who might again in 2021, the report stated, noting that agency valuations had grown too excessive for a lot of.