Advisor M&A Fell in 2023: Why DeVoe Says It's No Big Deal

RIA mergers and acquisitions declined year over year for the first time in at least a decade in 2023, as higher interest rates discouraged buyers, according to a new report Thursday by DeVoe & Co. 

For advisors looking to buy or sell, the good news is that the overall M&A market remains busy. 

Deals also sped up in the fourth quarter of 2023, according to DeVoe’s latest RIA Deal Book report. Sixty-six deals closed in that quarter, up 8% over the prior year. 

“Many sellers believe that the interest rate environment has compressed valuations,” the firm’s CEO and founder, David DeVoe, said in an email to ThinkAdvisor on the study. “Pausing any major moves is not uncommon in times of uncertainty or volatility.” 

What to know: In 2023, the number of deal closings fell 5% to 251, from the record 264 in 2022. Up to that point, the industry had seen nine consecutive years of record deal volume, DeVoe said in the report. 

In addition to interest rates, “other factors contributing to the slowdown included extended due-diligence processes, evolving deal structures and a greater emphasis on the true value of a buyer’s equity,” the report authors wrote. 

Why it matters: In particular, RIAs seeking to sell their practice internally face a succession crisis. The average advisor is in their 60s and aging out of the profession. But in 2023, only 18% of next-gen RIA advisors were perceived as being able to afford to buy their firms from the current owners — down from 38% who could back in 2021, the report said, noting that firm valuations had grown too high for many.