Consolidation of plan assets expected to continue in 2022


Continuing a trend that emerged in 2020 and accelerated in 2021, large pure play wealth managers are expected to continue to be a major force for pension M&A activity, the report says. 2021 RIA M&A Deal from ECHELON Partners.

In 2021, there were 17 transactions involving pension plan advisors with at least $1 billion in assets and/or retirement platforms, representing a 143% increase from 2020’s seven transactions involving the same type of seller.

The ability to sell wealth and retirement services, particularly in the DC market, has generated increased interest from the biggest buyers in each respective market, according to ECHELON. “There are natural cross-selling synergies between private client wealth management and pension advice, and we believe this type of transaction will continue to make strategic sense,” the company said.

The two largest buyers in the retirement space are HUB International Limited and OneDigital Health and Benefits, the report observes. But the biggest deal was Empower’s acquisition of Prudential Financial’s $3.55 billion pension business. This deal involved $314 billion in assets and included Prudential’s DC, DB, unqualified and rollover business lines, stable value and separate accounts.

Prior to this year, CAPTRUST was the only large-scale pension consolidator that had a significant wealth practice, the report further notes. However, with Creative Planning’s acquisition of Lockton’s $110 billion AUM retirement practice and other major players reporting or announcing comparable deals, the company expects deal volume to increase in connection with this. tendency.

New all-time highs

Overall, M&A activity in the wealth management space hit a new all-time high in 2021, marking the ninth consecutive year of an increase in the number of deals in the sector, ECHELON notes. “A combination of factors, including anticipated changes to the tax code, favorable capital market conditions and increased interest from private equity buyers and long-term capital providers, contributed to the unprecedented increase. record of M&A activity this year,” the report said.

There were 307 industry deals announced last year, nearly 50% more than the previous 2020 record of 205 deals. Adding to the record activity, there were 145 business acquisitions with $1 billion or more in assets, the most in a single year. Average deal size also increased, surpassing $2 billion in assets under management for the first time. A total of $576 billion in assets were acquired last year, according to the report.

Strategic buyers and private equity as driving forces

Strategic acquirers are again the dominant force in deals, with private equity on their side. The category closed 147 total deals in 2021, representing the category’s highest share of total deals since ECHELON began tracking data in 2007, the report notes.

ECHELON notes that almost all major strategic acquirers in the industry have at least one PE partner. This fact, combined with the increased share of strategic acquirers in announced deals in 2021, led to private equity investors being directly or indirectly responsible for 209 total deals in 2021, or 68% of the year’s total. “Whether it’s establishing consolidation-focused platforms, making add-on acquisitions, or providing growth capital to WealthTECH’s next unicorn, interest from this group of buyers continues to be significant. “, observes the company.

While most deals continue to be estate-driven buyouts, the report further notes that there is a growing demand for minority deals, which is up 58% year over year. in volume in 2021.

WealthTECH mergers and acquisitions also exploded in 2021 as the “technification of wealth management” was pushed forward by key transitional forces like the ongoing pandemic. According to the report, increased personalization of portfolios, access to distributed platforms for alternatives, and the global race to create the best all-in-one outsourcing platform for advisors were among the underlying themes of the top deals. .

2022 outlook on mergers and acquisitions

This year, ECHELON anticipates another active year for M&A wealth management. “Despite the macro risks (mainly inflation and, therefore, a hawkish Fed), we expect continued demand for wealth management mergers and acquisitions from industry players,” the company said. ECHELON identifies five key M&A drivers that will drive strong activity in 2022 and beyond:

  • debt markets will remain accommodative;
  • private equity “dry powder” hits record highs;
  • US buyers will step up consolidation efforts overseas;
  • cross-selling opportunities between wealth management and retirement services; and
  • incumbents are investing heavily in WealthTECH through acquisitions.

“Buyers who are able to articulate a compelling value proposition to sellers while executing a carefully crafted M&A strategy are likely to have the greatest success,” the report states.

For sellers, ECHELON believes that rising valuations and the desire for outside capital to fuel activities, such as mergers and acquisitions, will push larger companies to consider majority or minority sales of their businesses. Other factors include an aging demographic of advisors, with many business owners seeking a succession solution through outside sales.


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