Strategic acquirers – firms that take a financial interest in a registered investment advisory (RIA) firm to help them grow and perform more effectively through strategic guidance and operating support – are behind 39 per cent of all RIA M&A activity in 2016.
That’s according to a report from Fidelity Clearing & Custody Solutions – The Fidelity 1H 2016 Wealth Management M&A Transaction Report – which highlights the RIA mergers and acquisitions through the first half of 2016.
The report outlines different models of strategic acquirers as well as their approaches to acquisition. The findings also highlight how a need for scale, in order to help improve firm profitability, has driven this continued industry consolidation.
“Our goal with this report is to help advisors who are considering strategies to take their businesses to the next level to better understand their options and learn more about how to navigate the M&A space,” says David Canter, executive vice president, practice management and consulting, Fidelity Clearing & Custody Solutions. “One thing they should know as they prepare for the negotiation process is that they will have to redefine their role as an entrepreneur. While that may mean giving up some control in order to continue to grow their business, a strategic acquirer may also help to drive scale and growth through capital and expertise.”
The 1H 2016 report builds on the findings from Fidelity’s M&A Transaction Report issued in April 2016, which included specific details on the transactions in order to offer more insight on what’s really going on in the marketplace.
For the majority of strategic acquirers, their approach has generally evolved from acquiring the cash flows of books of business to a more deliberate focus on building sustainable and better integrated businesses through acquisitions. The report, leveraging insights from firm leaders, introduces five strategic acquirer models.
In addition to providing a detailed list of transactions for 1H 2016 and highlighting strategic acquirer models, the report outlines questions that RIAs should ask themselves before beginning to engage with strategic acquirers.
“The biggest takeaway here for RIAs is that M&A strategies are becoming an increasingly important consideration for the future of their businesses,” says Canter. “In order to realise their full potential value, advisors need to think about the firm they want to partner with and whether their businesses are in a good position for a successful acquisition.”
