Despite the market’s continuing volatility, or perhaps because of it, m&a deals in the RIA industry picked up dramatically in the first three months of this year in both number and asset volume. In the first quarter, 18 deals were done, with $29 billion in assets changing hands. In the first quarter last year, RIAs did 10 deals representing $14 billion in acquired assets.

The volume of deals is unlikely to slow this year. According to a Citigroup study on RIAs published last fall, about one-third of RIAs said they want to buy another RIA over the next 12 months. It may be that RIA advisors have come to terms with the compressed valuations of 2008 and are making up for lost time.

“There was a disparity in perceptions of what firms were worth in 2008. Sellers were used to the high 2007 valuations. Meanwhile buyers saw a decline in assets and compressed cash flow statements, so they were offering lower deals,” Devoe says. Until late last year, a firm generating $100 million in revenue could expect to get an offer of 6 times EBIDTA, or more. Today, an acquirer would be more likely to offer 4 times EBIDTA, he adds.

Market turmoil also meant some RIAs had to put off plans to join forces with other RIAs. Planning an acquisition or sale usually happens “after hours,” according to consultants, and advisors were already working overtime for clients. “If we didn’t have that volatility, there would probably been about 20 more deals last year,” says Dave Devoe, managing director of M&A at Schwab. In 2008, a total of 82 deals were done involving firms with $134 billion in client assets, a slight acceleration versus 2007, when 80 deals were done, with $100 billion in assets acquired.

Not only are number of deals and the size of deals up this year versus 2008, but RIAs are now the number one acquirers of other RIAs. Over the last few years, holding companies like Focus Financial and United Capital have been the largest acquirers of RIAs. That’s not the case any longer. Advisor-driven deals accounted for 60 percent of total deals in the first quarter versus 50 percent for all of 2008.

“This demonstrates the growing sophistication of RIAs. They are more strategic in how they shape these deals and using them to accelerate their business,” Devoe says. There’s been an increase in the number of management buyouts among RIAs—teams that want to negotiate a spinoff deal with party that owns them. In 2006, spinoffs made up 3 percent of deals. In 2007, that rose to 5 percent and in 2008, it was 7 percent. Through the first quarter, management buyouts account for 22 percent of RIA M&A deals.

In March, Boston Private announced two such spinoffs. It sold a 75 percent stake in Sand Hill Advisors to management there for an undisclosed amount. That same week, Boston Private Value Investors was spun off and sold to the RIA’s management. It’s now 100 percent employee owned.

Meanwhile, holding companies, which were the biggest buyers of RIAs for last couple years have taken a major step back. They make up for about a third of the deals that happened through March 2009. In 2007, holding companies were responsible for 45 percent of assets acquired in RIA deals. (Click here to read more about the acquisition slow down among holding companies.)