After two acquisitions so far this year, AlTi Global Inc., the giant registered investment advisor that targets wealthy clients, continues to see potential mergers and acquisition targets on the horizon.
With $68 billion in client assets, AlTi Global has had a busy year.
Since its merger with a special purpose acquisition firm in January, which resulted in its listing on the Nasdaq, AlTi Global has made two acquisitions. In May, it announced the purchase of AL Wealth Partners, which is based in Singapore and has more than $1 billion in client assets. Three months later, the firm bought a Swiss-based multifamily office for $1.3 billion, which also works with wealthy clients in Italy.
There may be fewer firms on the market now, but those that are remain attractive, AlTi Global CEO Mike Tiedemann said during a conference call Tuesday afternoon following the release of the firm’s third-quarter earnings.
“There are fewer firms, but there are some high-quality firms that have been competitors of ours for years that want to engage and see us as a viable long-term option for them,” Tiedemann said.
“We are a destination, a company with a unique platform, and we have a global footprint,” he said. “When a company that deals with the ultra-high-net-worth client evaluates strategic M&A decisions, we are a very credible counterparty.”
The market for RIA acquisitions has changed this year, noted one industry analyst, who asked to speak anonymously. Deals are being made but buyers have become more cautious, especially as RIAs begin to integrate firms.
Interest rates have risen in the past two years, making it more expensive to borrow money for deals. Meanwhile, some potential RIA buyers, such as private equity funds, are staying on the sidelines because they missed the early stages of the M&A frenzy.
“We saw valuations peaking in 2022 at the height of the RIA M&A boom,” the analyst said. “Now it’s still a very active auction process and there’s a healthy level of activity, but buyers are a little more disciplined. Eighteen months ago, deals were happening faster. Buyers are now more cautious with due diligence.”
In its earnings slideshow, AlTi Global said it is seeking “at least” $16 million in annualized net cost savings, as well as a long-term target of EBITDA – earnings before interest, taxes, depreciation and amortization – margins in the mid-30s. EBITDA is a key cash flow metric for determining the value of an RIA, and firms typically have EBITDA margins ranging from 25% to 40%.
The company reported revenue of $49.2 million for the quarter ending in September, and $159.2 million for the first nine months of the year. Net income for the quarter under GAAP, or generally accepted accounting principles, was a loss of $171.1 million, much of that the result of an impairment loss of $154 million.
