Deals & People July 23, 2024

Expected Drop in Interest Rates Fuels Wealth Management M&A

An Echelon Partners report showed robust activity in mergers and acquisition in Q2.

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The expected decline in interest rates is fueling an already-hot market for mergers and acquisitions among registered investment advisories, as retirement and wealth management continue to converge, according to the Echelon Partners “RIA M&A Deal Report” for the year’s second quarter released on Monday.

Interest rates saw a significant rise from early 2022 through August 2023, causing a temporary dip in deal volume, Echelon reported. However, the persistent supply of willing sellers and the potential for strong returns sparked greater creativity in deal financing and structuring, leading to heightened activity from Q3 2023 through Q1 2024.

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“Now with discussions of a possible rate cut in late 2024 and more in 2025, slight optimism for less expensive financing may be returning,” the report stated. “2Q24’s strong activity relative to 2Q23 may be the first sign that this optimism is beginning to materialize.”

Based on the report, Q2 was the second most active Q2 on record, trailing only Q2 2022. Historically, Echelon indicated that the second quarter has been the least active for deal announcements in three of the last four years, but 2Q 2024’s robust activity underscores growing optimism in the wealth management M&A markets. The number of deals in 2024 is projected to surpass that of 2023, positioning this as the second most active in dealmaking over the past six years.

Notable transactions included the merger of Focus partner firms Buckingham Wealth and the Colony Group, creating a $115 billion platform, and Cerity’s acquisition of Agility, a $15 billion Denver-based OCIO and RIA, from Perella Weinberg Partners.

The second quarter of 2024 witnessed robust M&A activity in wealth management, Echelon reported, with 75 transactions announced, involving a total of $952 billion in assets transacted. As the year progresses, the industry is on track to see 332 deals completed by the end of 2024.

Financial acquirers, mainly private equity firms, announced 16% of the quarter’s deals, a small increase from 14.4% in the first quarter, the report revealed. Major private equity transactions included minority investments in Fisher Investments made by both Advent International and the Abu Dhabi Investment Authority and GTCR’s deal with AssetMark to take the $117 billion AUM/AUA turnkey asset management program private.

Private equity remains highly active in wealth management, directly participating in 16% of deals and involved as direct investors or sponsors in 70.7% of deals in the second quarter, according to Echelon. On average, the AUM per deal for the 12 direct investments by private equity investors in the second quarter was $54.6 billion, significantly higher than the average AUM for RIA deals, which stood at $3.7 billion.

Echelon stated that RIA acquirers engaged in a wide range of deal sizes, from $100 million to more than $45 billion in AUM. Notably, larger transactions were more prevalent among other strategic buyers. For instance, insurance giant Marsh McLennan acquired $66 billion AUM U.K.-based Cardano, marking the largest strategic acquisition in the second quarter. Meanwhile, Echelon Partners served as the exclusive financial adviser to $12.5 billion AUM/AUA TAMP Tru Independence in its sale to Sanctuary Wealth.

Echelon Partners’ “RIA M&A Deal Report” compiles data on mergers, majority equity sales/purchases, acquisitions, shareholder spinoffs, capital infusions, consolidations and restructurings involving RIAs registered with the Securities and Exchange Commission.

Uncategorized July 23, 2024

Advisory M&A News – 7/22/24

Avantax adds Long Island-based S&P Financial Services; Blue Owl announces acquisition of Atalaya Capital Management’s business; CW Advisors acquires New Jersey RIA Mercadien Asset Management.

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Avantax Adds Long Island-based S&P Financial Services

Avantax Inc., a firm within the Cetera Financial Group and a provider of tax-focused financial planning and wealth management, added financial advisers John Surace, Kelly Powers and their S&P Financial Services team, based on Long Island in Hauppauge, New York.

Transferring to Avantax from Osaic, S&P Financial has approximately $150 million in client assets under administration, as of June. According to the firm, its mission is to build strong, multi-generational relationships with clients.

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Prior to forming S&P Financial Services, Surace’s experience included working as an executive at a global financial services firm where he supervised a location with more than 300 advisers. Meanwhile, Powers has managed money for clients for 30 years, while working in roles such as vice president, sourcing, hiring and training new financial advisers.

“When we started talking with Avantax, things sounded so good that I was actually skeptical going in,” Surace said in a statement. “Transitioning to a new broker/dealer is stressful, and in other places the level of services that were promised turned out to be subpar. We didn’t experience any of that with Avantax. We trusted our gut, went with Avantax, and it’s been all green lights from the beginning.”

Blue Owl Announces Acquisition of Atalaya Capital Management’s Business

Blue Owl Capital Inc., an alternative asset manager, announced it has entered into a definitive agreement to acquire the business of alternative credit manager Atalaya Capital Management LP for $450 million. The acquisition is expected to close in the second half of 2024 and is expected to be modestly accretive to Blue Owl in 2025.

Blue Owl’s Co-CEOs Doug Ostrover and Marc Lipschultz said in a statement, “The acquisition of Atalaya adds adjacent and scaled alternative credit capabilities that complement Blue Owl’s leading position in direct lending.”

Atalaya focuses primarily on asset-based credit investments across consumer and commercial finance and corporate and real estate assets, and it managed more than $10 billion in AUM as of June 30. Since inception, Atalaya has deployed more than $17 billion of capital, with nearly 70 percent of deal flow sourced directly through asset owners, originators or joint venture partners.

Atalaya was founded in 2006 by Ivan Zinn, who serves as founding partner and CIO. Zinn will join Blue Owl as head of alternative credit and will report to Craig Packer, head of credit and co-president of Blue Owl. Atalaya is based in New York and has approximately 115 employees, including more than 50 investment professionals. When the acquisition closes, most of Atalaya’s employees are expected to join Blue Owl and will continue to manage existing Atalaya funds.

CW Advisors Acquires New Jersey RIA Mercadien Asset Management

CW Advisors LLC, a registered investment adviser headquartered in Boston, announced the acquisition of Mercadien Asset Management LLC, an RIA located in Hamilton, New Jersey. The deal was completed earlier this month and is the third acquisition for CWA since commencing its partnership with Audax Private Equity in June 2023.

“Ken and his team are outstanding,” said Paul Lonergan, CEO of CWA, in a statement. “We are excited to welcome the team and their clients to CWA. With a strong focus on financial planning and client service, they are a great asset to the firm.”

The addition of the New Jersey location enhances CWA’s presence in the Mid-Atlantic. Hamilton joins CWA’s offices in Wynnewood, Pennsylvania, and Columbia, Maryland. CWA now has nine offices across the United States, with 92 employees and more than $8.8 billion of assets under management.

“CWA’s philosophy and platform make them the perfect partner to continue providing quality service and an expanded offering to our clients,” said Ken Kamen, president of Mercadien Asset Management, in a statement.

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