July 9, 2021
A flurry of activity since the first week of July indicates that the most aggressive buyers and aggregators of registered investment advisory firms have not lost their appetite for large acquisition targets.
RIAs with $1 billion or more in client assets under management, in particular, are the apples of acquirers’ eyes so far in the second half of 2021, recent deal announcements suggest. Thursday alone produced three such announcements from three private equity-backed firms.
Captrust Financial Advisors said it purchased Nachman Norwood & Parrott Wealth Management, a Greenville, South Carolina RIA managing about $2.1 billion in client assets.
The deal for the 17-person firm closed in May, a Captrust spokeswoman confirmed.
“Even as one of the largest firms in South Carolina, we knew we would need access to even greater tools and resources to continue to provide an outstanding client experience,” Bob Nachman, one of seven NNP Wealth Management partners, said.
The transaction marks Captrust’s 50th since 2006–and fifth this year–and gives the Raleigh, North Carolina RIA giant its first physical office in neighboring South Carolina.
Backed by private equity firm GTCR, Captrust manages roughly $60 billion in assets and oversees a total of roughly $600 billion across its wealth management and retirement plan advisory divisions.
Wealth Enhancement Group, meanwhile, said it purchased Los Angeles-based RIA Oakwood Capital Management, a 14-person firm managing slightly over $1 billion in assets.
Plymouth, Minnesota-based WEG’s total client AUM was expected to climb above $37 billion with the transaction, which closed on June 30, the TA Associates-backed company said.
Founded in 1998 by president and chief executive Bruce Mandel, Oakwood marks WEG’s second Southern California acquisition, following its addition of $1.6 billion-AUM Pillar Pacific Capital Management on June 1.
Oakwood “still has significant room to grow” and will be able to “streamline” its operations and free up more time for clients with WEG’s support, said Jeff Dekko, chief executive of WEG.
Mariner Wealth Advisors, which oversees roughly $40 billion in assets and has completed about two dozen M&A deals since its 2006 founding, announced its first transaction since taking a minority investment from a Los Angeles-based private equity firm.
The Overland Park, Kansas-based RIA is acquiring Allegiant Private Advisors, a Sarasota, Florida-based RIA managing $1 billion in client assets.
Allegiant, an 18-person firm, is primarily owned by chairman and founder Marty Kossoff, who ranked 11th on Forbes’ 2020 list of “Best-in-State” wealth advisors. The firm will become Mariner’s third office in Florida, where it also has locations in Coral Gables and West Palm Beach.
Mariner, which is majority owned by chief executive Marty Bicknell, in April sold a minority stake to private equity firm Leonard Green & Partners. The RIA hadn’t announced a deal since March 2020, a pause that Bicknell said was intentional–as Mariner digested the dozen RIAs it purchased in the prior year–but also temporary for the 360-advisor firm.
There’s “no reason” Mariner couldn’t eventually approach 5,000 advisors and compete head-to-head with the wirehouses, Bicknell said after the LGP news.
The three deals followed on the heels of multiple announcements last week from publicly traded RIA acquirers Focus Financial Partners and CI Financial, both of which touted transactions for $1 billion-plus-AUM firms. Both firms’ CEOs have defended taking on more debt to fuel dealmaking.
There were 22 deals involving firms with more than $1 billion in AUM announced during the second quarter, 10 fewer than the first quarter, but “significantly” more than prior to 2020, according to advisory-firm investment bank Echelon Partners.
The $1 billion-plus-AUM sector “continues to be the most competitive part of the market as both strategic and financial acquirers compete for platforms with scale and large pools of talent,” Echelon’s Thursday-released quarterly report said.
The average AUM per transaction swelled to nearly $2.07 billion as of this year’s second quarter, more than double the $1.01 billion average AUM recorded in 2017, according to the report.
Echelon predicted that 2021 will be a record-setting year for average AUM in transactions, thanks to “robust equity markets, new avenues for organic growth, and feverish interest from current and emerging buyers.”
Dealmaking could spike even higher in the back half of 2021, ahead of any potential changes to the U.S. tax code, including President Joe Biden’s proposed hikes on capital gains that advisors fear could erode their profits from selling their firms, Echelon said.