Asset and wealth management: US Deals 2023 midyear outlook

Asset and wealth management deals market remains historically strong

Despite persistently high inflation, rising interest rates and other headwinds, the volume of deals in the asset and wealth management (AWM) sector over the last 12 months (ended May 15, 2023) was actually higher than the volume of deals announced in 2021, when more than 300 AWM deals were recorded. At the same time, the sector had several announced transactions with deal values of $1 billion or more.

  • TPG Inc.’s acquisition of Angelo, Gordon & Co. L.P., a private credit and real estate investment firm.
  • Clayton, Dubilier & Rice, LLC’s take-private of Focus Financial Partners Inc., a publicly-traded RIA aggregator.
  • A consortium of investors taking a minority stake in CI US Holdings Inc., a private RIA aggregator.
  • Mubadala Investment Co.’s acquisition of Fortress Investment Group, an alternative asset manager.
  • The acquisitions of three mid-size banks with substantial wealth management franchises in FDIC-assisted deals.

The active AWM deals market has been fueled by firms that have available capital and balance sheets strong enough to help them pursue and close deals, without being dependent on external leverage. In contrast, businesses that are reliant on external financing are finding stretched valuations in the M&A market and are unwilling to close deals given interest rates, which have gone up by ~250 bps over the last 12 months. As a result, many asset and wealth managers have begun focusing more intently on finding operational efficiencies to improve profitability and drive higher valuations. Many business leaders also fear a recession in the next six to 12 months, given other macroeconomic factors. 

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Transact to transform

Companies face markets being reshaped by technology and disrupted by geopolitical unrest, a global pandemic and economic shocks. As a result, CEOs are turning to transformative acquisitions to reposition and reinvent their businesses for long-term success. Companies are also beginning to crack the code on how to make big, transformative deals successful: leveraging experience, early and sustained investment in integration, and a commitment to creating and implementing new long-term operating models.

Learn more about leading practices and transformational mindsets in PwC’s new M&A integration report.


Key deal drivers

Necessity for business reinvention

Alternative asset managers continue to have significant capital available to deploy and, with strong fundraising pipelines, firms are now better-than-ever positioned to maximize returns to investors. Strategic dialogues have led to elevated acquisition activity in H1-23 focused on diversification in asset classes and distribution channels. The first half of 2023 marked some noteworthy deal activity, including TPG’s planned acquisition of Angelo Gordon (announced in May), which would provide the alternative asset management firm access to $53 billion of credit and real estate assets under management. 

Tighter bank financing, as retail deposits flow away from banks given higher interest rates on offer in money market instruments, combined with a pull-back by regional banks following the recent banking turmoil spurred by the failures of three large regional banks, has led to increased demand for private credit. Most real estate lending is already done outside of money center banks, and with pressure on regional banks, there is a unique opportunity for alternative asset management firms to step in and fill that void through their private lending arms. In addition, there’s been an uptick in strategic partnerships between regional banks and alternative firms whereby loans will be acquired and indirectly lead to higher fee-related earnings, an increasingly utilized non-gaap measure, for the manager from fees charged to their customers.

The current volatile economic environment also may prompt some companies to consider divestitures as a way to transform their business. A recent PwC study explores the wide range of internal and external influences that affect the speed and effectiveness of portfolio decisions and divestitures — offering insights into how companies can reinvent themselves through M&A. 

Wealth management platform M&A

Wealth management consolidation has historically dominated the sector’s M&A activity. While recent wealth management deal volumes and value have been propelled by small-scale consolidation on the back of roll-up acquisitions by RIA aggregation platforms, H1-23 saw several transactions involving the platforms themselves.

Private equity has long had interest in RIA aggregation due to the scalability and synergy opportunities that go along with the roll-up strategy. However, the first half of 2023 marked a new wave of platform deals driven by PE firms searching for stable, recurring revenue streams such as those offered by the aggregation platforms. Significant platform deals include CD&R’s high-profile take-private of Focus Financial Partners (announced in February), and a consortium of investors’ minority stake in CI Financial (announced in May). Although both businesses are, at their core, similar, the disparity in the valuation multiple for each deal is stark. In addition, CI Financial — a fast-growing, pre-IPO business — sold a minority stake at a reported ~26x multiple on adjusted EBITDA, while Focus Financial Partners — a more mature publicly listed company that operates a largely independent network of RIAs — was taken private at a valuation reported to be in the low teens.

With the largest RIA aggregator having exited the public markets, several RIA roll-up platforms with substantial PE ownership, including Creative Planning, Captrust, Mercer Advisors, Hightower, Mercer Advisors and Edelman Financial Engines will be watching what their peers are doing.

Regional banks with access to the affluent through wealth management franchises

In the last three months, we’ve seen three prominent bank holding companies with substantial wealth management businesses fail and be acquired by competitors in FDIC-assisted deals.

  • First Republic Bank, which reported $271 billion in wealth management AuM and $212 billion in balance sheet assets in December 2022, saw its deposits, and much of its assets, acquired by JPMorgan Chase in April 2023.
  • Silicon Valley Bank (SVB), which reported $16 billion in wealth management AuM and balance sheet assets of $212 billion, saw its deposits and much of its assets acquired by First Citizens Bank. SVB previously acquired Boston Private Bank & Trust in July 2021 to beef up its wealth management offerings.
  • Signature Bank, which reported more than 800 professionals in its “private client” teams and $110 billion in balance sheet assets, saw much of its deposits and assets acquired by New York Community Bank, in March 2023.

All three of these banks had grown assets and toplines at double-digit rates over the last five to seven years, by focusing on niche client segments with high reported RoEs. The banks failed following asset-liability mismatches that they built up on their securities holdings, and high proportions of uninsured deposits, which led to runs on their deposit bases. However, their wealth management franchises were considered valuable parts of the franchises by acquirers and continued to be stable fee-generating businesses even as they suffered some FA departures given the distress in their stock price trends over March and April 2023. PE-backed RIA platforms were quick to try to pick off FAs affiliated with these institutions. For other regional banks active in the wealth management business, this episode again reinforced the need to make a play for wealth management assets — and loans for their affluent and high-net-worth clients — as well as the need for prudent balance sheet management.

“AWM deals persisted in the first half of the year despite broad market impacts on M&A. However, as interest rates continue to climb in a challenging macroeconomic market, the impacts have also led managers to begin focusing more closely on portfolio optimization to drive profitability and higher valuations.”

— Greg McGahan, US Financial Services Deals Leader and AWM Deals Leader
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