BANK-RIA Deals Gain Mo­men­tum

“Banks tra­di­tion­ally pay higher valu­a­tions, but [RIAS] should go into deals with eyes wide open,” in­vest­ment bank founder David Devoe says.

Financial Planning - - CONTENT - By Ann Marsh

Banks may “pay higher valu­a­tions, but [RIAS] should go into deals with eyes wide open,” Dave Devoe says.

BIG BANKS, MA­JOR ACQUIRERS OF RIAS 15 YEARS ago, have re-en­tered the M&A space with a vengeance, snap­ping up 15% of deals so far this year, com­pared with just 3% for all of 2016.

That’s ac­cord­ing to a new study by Devoe & Co., an in­vest­ment bank that tracks RIA deals on a quar­terly ba­sis. “Banks have es­sen­tially quin­tu­pled” their mar­ket share in a mat­ter of months, founder David Devoe says.

The new big money play­ers are adding fuel to a sus­tained boom in

RIA deal­mak­ing. Devoe & Co. has recorded 35 or more trans­ac­tions for five straight quar­ters. Thus far,

2017 has pro­duced 82 deals, a 15% in­crease over the 71 buy­outs that took place dur­ing the same pe­riod last year, the study found.

The amount of as­sets un­der man­age­ment ex­ceeded $100 bil­lion this year for the first time since the first quar­ter of 2015, ac­cord­ing to the study.

Sev­eral years ago, Devoe pre­dicted that the banks would go on a buy­ing spree, as they came out of the re­ces­sion. Back then, “They had their own is­sues rather than de­ploy­ing cap­i­tal to­ward M&A,” he says. “[But] a lot of those chal­lenges were over­come a cou­ple of years ago, [and] I an­tic­i­pated they would en­ter the mar­ket sooner.”

With the banks back, RIAS’ pro­por­tional share of deals has dropped. While the RIAS ac­counted for nearly 40% of deals last year, this year so far this sec­tor’s share is only 26%.


First Repub­lic Bank, for ex­am­ple, has done a flurry of smaller deals, pick­ing up four wire­house break­aways so far this year, all with less than $1.5 bil­lion AUM,

“Clearly First Repub­lic con­tin­ues to be very in­ter­ested in this space,” Devoe says. Af­ter buy­ing Lu­mi­nous Cap­i­tal and its $5.5 bil­lion in as­sets in a head­line-grab­bing deal in 2012, the bank bought the $6.1 bil­lion AUM multi-fam­ily of­fice Con­stel­la­tion Wealth Ad­vi­sors three years later in 2015. The banks’ en­try into the space has dis­rupted a duet be­tween RIAS and con­sol­ida­tors. “Over the last six or seven years, RIAS and con­sol­ida­tors have re­ally gone head-to-head in ac­quir­ing the most firms,” Devoe says. “They gen­er­ally traded off be­tween 40% or 45% of the deals.”

RIAS in­ter­ested in sell­ing them­selves to a bank should be wary, given that many banks are look­ing to sell their own prod­ucts to the RIAS’ clien­tele. “Bank deals can be chal­leng­ing,” Devoe cau­tions. “Over­all, they have had pretty mixed re­sults. That cross-sell strat­egy is re­ally tough to im­ple­ment.”

Many RIAS chafe at be­ing told what to sell to their clients. And RIAS that have bro­ken away from larger or­ga­ni­za­tions for the ben­e­fits of in­de­pen­dence may find it dif­fi­cult to, once again, be­come part of a larger whole.

Devoe cited the ex­am­ple of Bos­ton Pri­vate, which af­ter buy­ing a se­ries of RIAS later sold off some of them off.

Try­ing to blend the two cul­tures “was not easy,” Devoe says. “Banks tra­di­tion­ally pay higher valu­a­tions, but [RIAS] should go into deals with eyes wide open.”

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