06.27.23

RIA Valuations Are Up but Hitting a Plateau: Fidelity

by: Bruce Kelly

Even with registered investment advisory (RIA) firms getting more expensive to buy, the industry doesn’t foresee a slowdown in dealmaking in the next five years, according to a new study by Fidelity Investments. RIA firms have recently routinely been valued at multiples in the neighborhood of eight times EBITDA, or earnings before interest, tax, depreciation and amortization, a common valuation multiple used in RIA transactions. From January 2020 through this March, the median EBITDA multiple for firms increased from seven times EBITDA to nine times, with sellers’ expected EBITDA multiples rising from nine times to 11 times, according to Fidelity. Driving the increase are high organic growth, young and aggressive next-generation leadership and a key geographical footprint, according to Fidelity. Laura Delaney, Fidelity’s vice president of practice management and consulting, said, “The price has gone up two percentage points, but multiples right now are plateauing for the high-quality firms.”

Read the full article on InvestmentNews