Wealth administration mergers and acquisitions dropped barely in 2023 however remained near the trade’s excessive set in 2022 regardless of a contraction within the broader M&A market, in response to Echelon Companions.

The corporate’s annual report, launched in the present day, registered 321 transactions final 12 months, a 5.6% decline from 340 in 2022. The typical property beneath administration per deal, which Echelon Senior Vice President Barnaby Audsley stated is commonly used as a proxy for valuations, rose to $1.668 billion, a 2.8% improve over 2022.

The report is a followup to a abstract launched final month.

Registered funding advisors have been the acquirers in 71.3% of the transactions, with essentially the most prolific acquirers being Wealth Enhancement Group with 16 offers, Mercer Advisors with 11, Captrust and Savant Capital Administration with 9 every, and Beacon Pointe Advisors with eight.

Regardless of the downtick in M&A numbers, Audsley stated that when taken within the context of the bigger contraction of the general M&A market, the wealth administration trade has been extraordinarily resilient and continues to draw buyers seeking to profit from the very optimistic attributes of those companies.

“It’s not all the time appreciated simply how resilient the wealth administration trade was in largely a down 12 months for M&A,” he stated. “I feel that’s typically supportive of the theme that it’s a candy spot not solely inside monetary providers, however throughout the normal enterprise ecosystem generally versus different verticals on the market.”

The function of the advisor in defending shopper property in unstable markets, enabling their income and profitability to outlive market troughs, he stated, gives a compelling alternative to buyers as they weigh their choices.

“Valuation multiples have stayed secure on this atmosphere, when you’ve seen others, particularly within the expertise sector, get crushed,” he continued. “That lends itself to buyers this trade, income and profitability, and realizing that is a sexy place to allocate capital.”

Whereas 321 M&A offers have been reported, the precise quantity may very well be three to 4 instances that quantity, the Manhattan Seaside, Calif.-based funding banking agency stated, as many transactions go unreported. Monitoring what’s reported, nonetheless, stays an essential metric for the trade, Audsley defined.

For instance, final 12 months’s tally made it the third consecutive 12 months that the trade logged greater than 300 offers. Earlier than 2021, the trade noticed annual offers between 100 and 200 because the norm. “If we have been to stay at 300 for the following 5 years, I feel that may be extra of a trigger for concern than a small decline between one 12 months and the following,” he stated.

The report additionally discovered that the variety of transactions involving advisories with $1 billion-plus in AUM remained above historic norms as nicely, regardless of the upper price of capital attributable to larger rates of interest.

“The resiliency on this exercise may be an indication of elevated creativity in deal buildings adopted by companies striving to finish investments,” the report stated. “Structured minority investments, with options akin to paid-in-kind or most well-liked distribution rights, have develop into extra standard within the largest transactions.”

Wanting forward, the Echelon report predicted 2024 will likely be one other sturdy 12 months for advisory M&A, given the power of progress prospects, the fragmented market and an ample provide of each consumers and sellers.

On the sell-side, the report famous a stunning response to the financial uncertainties of 2023. As a substitute of ready out the volatility by suspending a sale, sellers cast forward to execute succession-planning methods, both absolutely or partially. This pattern ought to proceed, the report stated.

On the buy-side, consumers constructing direct relationships for deal origination as an alternative of simply counting on an funding financial institution will give them a definite benefit in deal economics, as a minimum of a few of their acquisitions can be non-competitive.