The 2025 M&A Outlook: A Strong Start Fueled by Strategic Growth

Carrying over the momentum from a record-breaking Q4 2024, January 2025 delivered an impressive 35 announced merger and acquisition (M&A) transactions in the U.S. While this represents a slight decrease of approximately 8% compared to January 2024, the numbers tell a story of sustained growth and strategic realignment within the wealth management and insurance sectors. Private capital-backed firms continued to dominate the landscape, accounting for a significant share of the activity.

Key Drivers Behind January’s M&A Surge

Several factors contributed to the robust M&A environment in early 2025. Much of the activity from Q4 2024 was driven by an improving economic climate, firms seeking strategic partnerships for growth, and a shift in urgency surrounding potential capital gains tax changes. The re-election of Donald Trump eliminated the immediate concern over potential tax increases, leading some firms to postpone finalizing deals until 2025 to delay tax obligations for another year. This strategic delay likely influenced January’s activity and may continue to impact M&A trends through Q1 and Q2 of 2025.

Noteable Transactions in January 2025:

Carrying over from a strong December, January continued the momentum from 2024 and specifically Q4 2024, the biggest quarter on record. January delivered 35 announced merger and acquisition (M&A) transactions in the U.S. Once again private capital-backed wealth management firms led the way. While January 2025’s total represents a slight decrease of ~8% compared with January 2024, there are still many reasons to be optimistic about 2025.

Much of the activity of Q4 2024 was driven by an improving economic environment, firms pursuing strategic partnerships for growth, and reduced urgency to finalize deals in case of capital gains tax changes (if Democratic candidate Harris had won). Following Donald Trump’s re-election, that urgency ceased, leading to some deals being postponed to 2025 in order to delay tax payments another 12 months which is likely part of what contributed to January’s activity. There is a strong possibility that this deal delay from December will continue into the remainder of Q1 and perhaps even Q2.

Source: S&P Data, Fidelity, and DOXA Proprietary Database. Data as of 1/31/25.

Private capital-backed buyers accounted for 24 of the 35 transactions (69.6%) through January, representing a 14% increase since 2020 when private capital-backed buyers accounted for 55.4% of all transactions. Independent firms accounted for nine deals and 25.7% of the market, an uptick from 2024’s final percentage of 21.0% on 76 total independent deals. Insurance brokerages acquired two wealth management and retirement firms in January.

January saw significant M&A activity across wealth management, family office services, and retirement planning sectors. Transactions impacted key market specialties, including personal CFO services, tax compliance, estate planning, investment management for ultra-high-net-worth clients, private wealth management, business owner advisory, and retirement services. These deals have not only expanded operational capabilities and service offerings but also integrated advanced technology and compliance infrastructures, enhancing the overall strategic growth of the firms involved.

Private Capital’s Dominance

Private capital-backed buyers accounted for 24 of the 35 transactions in January, representing 69.6% of the total deal volume. This marks a significant rise from 2020, when private capital-backed transactions comprised 55.4% of the market. This trend underscores the growing influence of private equity in shaping the future of wealth management and insurance brokerage firms.

Independent firms also showed strong performance, securing nine deals and capturing 25.7% of the market—an uptick from 2024’s final figure of 21.0% based on 76 independent transactions. Additionally, insurance brokerages broadened their reach by acquiring two wealth management and retirement firms, signaling a strategic pivot towards diversification and holistic client offerings.

Looking Ahead: A Promising 2025 for M&A

The outlook for M&A activity in 2025 remains optimistic, driven by several key factors:

1. Pro-Business Policies: With the current administration’s focus on stabilizing or lowering taxes, reducing regulatory burdens, and implementing pro-business initiatives, the M&A landscape is expected to remain highly active. These policies create a favorable environment for deal-making, encouraging firms to pursue growth opportunities through strategic acquisitions.
2. Stabilization of Interest Rates: The anticipated stabilization of the rising rate environment is boosting buyer confidence. Predictable borrowing costs enable firms to plan long-term investments and expansion strategies more effectively.
3. Private Equity Influx: Continued capital inflows from private equity firms into registered investment advisors (RIAs) are driving consolidation. This trend reflects private equity’s confidence in the sector’s growth potential and the value of diversified service offerings.
4. Aging Advisor Demographics: An aging advisor base is prompting many firms to explore strategic partnerships and succession planning options. As industry veterans approach retirement, the need for continuity and growth through mergers and acquisitions becomes increasingly critical.
5. Strategic Diversification: Firms are actively seeking to diversify their service portfolios, as evidenced by insurance brokerages acquiring wealth management and retirement firms. This strategy not only broadens revenue streams but also enhances client value propositions.

Potential Challenges to Monitor

While the M&A environment is poised for growth, several potential challenges warrant attention:

• Regulatory Changes: Although the current administration favors deregulation, shifts in the political landscape or unforeseen regulatory changes could impact M&A strategies.
• Market Volatility: Economic uncertainties, including potential geopolitical tensions or market corrections, could influence investor sentiment and deal activity.
• Valuation Pressures: As competition for high-quality firms intensifies, valuation expectations may rise, posing challenges for buyers seeking attractive deals.

DOXA’s Perspective on 2025 M&A Trends

At DOXA, we remain vigilant in monitoring the evolving M&A landscape. Our insights into market dynamics, strategic partnerships, and economic indicators position us to guide firms through the complexities of mergers and acquisitions. The data from January 2025 underscores a resilient and adaptive industry, ready to capitalize on growth opportunities despite external uncertainties.

As we progress through 2025, we anticipate continued momentum fueled by favorable economic conditions, strategic investments from private equity, and a dynamic regulatory environment. Firms that proactively adapt to these trends will be well-positioned to achieve sustainable growth and competitive advantage.

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