OneDigital Investment Advisors and other serial acquirers of retirement plan businesses are eyeing regional banks for buying opportunities, according to merger and acquisition experts.
OneDigital earlier this month, for example, bought the 401(k) advisory and retirement plan servicing business of Huntington National Bank, a move that added 1,300 employers with $5.6 billion in retirement assets under management to its platform.
With the Huntington acquisition, OneDigital now has more than $100 billion in retirement assets.
The addition follows OneDigital's purchase two years ago of the 401(k) investment advisory business of bank holding company Truist Financial Corp., which bolstered OneDigital's platform by 1,200 plans with roughly $10 billion in assets.
"The OneDigital M&A team is actively seeking to make comparable deals with regional banks that have a similar geographical footprint to our existing teams and a strong culture alignment," said Peter Sims, OneDigital's vice president of corporate development, retirement + wealth.
Mr. Sims added that the challenges facing banks in the wake of the collapse of Silicon Valley Bank and widespread concern of a banking crisis has intensified opportunities.
"We see an opportunity to acquire retirement business and wealth management practices from regional banks that are looking to improve their balance sheets or eliminate business lines where they haven't seen significant value," Mr. Sims said.
Peter Campagna, a partner at merger and acquisition consulting firm Wise Rhino Group, views OneDigital as "developing a niche in lifting out retirement businesses that have been built under the umbrella of a bank."
Banks may have reached that "classic stage in the M&A cycle" where they recognize that while they've built a "nice business" it may not be part of their core services, Mr. Campagna said.
Dick Darian, also a partner at Wise Rhino, added that banks and other financial institutions are realizing that they don't have the expertise or focus to build out their retirement plan businesses.
"They understand that they're not going to be able to compete with OneDigital, Captrust and these other aggregators that have built out these efficient high-service operations," Mr. Darian said, adding that they're better off selling than they are trying to build out a specialty operation.
Mr. Darian anticipates that more banks will be looking to shed their retirement plan businesses. Regional community banks in particular are "looking at this and trying to figure out what to do next," he said.
