Mergers and acquisitions among retirement plan and wealth advisory firms have slowed this year and are not expected to keep pace with the record-breaking number of transactions that occurred in 2021 and 2022, according to a report from M&A consulting firm Wise Rhino Group.
The firm anticipates that 50 deals will close this year, compared with 74 deals that closed in 2022 and 76 in 2021.
Still, 50 deals would make 2023 the third-most active year in M&A activity for retirement plan and wealth advisory firms since they started merging in 2013, according to the report.
For more than a decade through early 2022, M&A activity was spurred by a lengthy uninterrupted bull market, but with the onset of high inflation, rising interest rates and stock market declines, deal-making took a slight pause, the report said.
"The overall tone of the market has changed somewhat compared to prior years," it said. "With increased borrowing costs and increased costs of servicing debt, buyers will now need to be more thoughtful around capital allocation, especially those using debt and financial leverage to facilitate growth."
Wise Rhino partners Dick Darian and Peter Campagna remained upbeat in the report, saying that despite the market challenges, M&A activity has continued to "chug along above normal historical levels."
Retirement plan advisory firms completed 14 deals in the first quarter, with the second quarter "looking stronger," the report said.
While deal volume in the first quarter is down a notch year-over-year, it is down from what has been historic highs, Mr. Campagna added in an email.
"This still puts current deal volume at very robust levels overall," he said.