Fed rate hike could cool RIA deal prices, but not for everyone
Michael Gray, partner at Neal, Gerber & Eisenberg.
Higher borrowing costs may hit mega-RIAs hardest as buyers could lean on rollover equity, says M&A lawyer Michael Gray.
The Federal Reserve’s first interest rate hike in three years is likely to weigh on both the volume and pricing of RIA mergers and acquisitions. One veteran dealmaker says the pressure probably won’t land evenly across the market.
The Fed raised its policy rate to a range of 3.75% to 4% at last week’s meeting of the Federal Open Market Committee, in a unanimous 12-0 vote that marked the central bank’s first hike since July 2023. The central bank had made its last cut in December 2025 and had since held its policy rate steady at 3.5% to 3.75%.
Michael Gray is a partner at Chicago-based law firm Neal, Gerber & Eisenberg, where he leads the Private Equity, Venture Capital & Growth Companies practice and the Fund Formation & Investment Management practice. He said the move will be felt in RIA dealmaking.
“I for sure think that the increase in interest rates last week and the hawkish implications by the Fed will have an impact on the volume of deals as well as on pricing,” Gray told InvestmentNews. “There’s no question that higher rates and the specter of higher rates will more likely than not push the price of deals down.”
How fast and how far prices fall in wealth management is harder to predict. The RIA space has spent years in a seller’s market, and dealmakers are on pace for the busiest year in the industry’s history. Echelon Partners projects total 2026 volume will reach approximately 500 deals, which would eclipse the prior high of 466 set last year.
“In this particular space, there’s so much capital chasing deals, and the prices, even over the last two or three years, have gotten higher and higher with more and more favorable terms to sellers,” Gray said. “It could still be that there’s not much impact in this space, but my gut would be it will certainly have some impact.”
The rate hike reverses a tailwind the industry had at least in part come to rely on. In its 2025 Annual RIA M&A Outlook, DeVoe & Company said a series of interest rate cuts and market stabilization in late 2024 reignited transaction momentum. At that point, 54% of RIA leaders expected deal volume to rise over the following 12 months.
Rollover equity as a pressure valve
Gray does not expect higher rates to upend the basic architecture of most transactions, particularly the add-on acquisitions that make up the bulk of deal flow.
“Generally, an RIA deal is money upfront, money for retention of clients and an earnout based on growth of the underlying client assets under management,” he said.
“The big volume is in add-on acquisitions. I don’t necessarily see that structure changing.”
Instead, he expects buyers to potentially lean harder on rollover equity, the portion of a seller’s proceeds reinvested in the acquirer’s own equity.
“One thing you could see is buyers asking for more rollover, and then they come out of pocket with less cash, which means they’ve borrowed less and given more, hopefully, upside to the seller in valuable rollover equity,” Gray said.
“There are levers besides valuation that can be turned in a higher rate environment,” he explained. “The easiest one, if the sellers are willing, is to still pay a high multiple but ask for more rollover.”
Why gravity may come for the largest RIAs
For firms asking when lofty RIA valuations will finally come back to earth, Gray argued the answer depends on where a firm sits in the market.
“If you’re a $4 billion RIA, growing at 12% a year and you’ve got a young team, you’re going to get paid a fortune for that business,” he said. “Where the gravity likely will kick in the most is, I think, at the very largest RIAs that may not have organic growth and where there are few buyers big enough to buy them.”
Those deals typically require acquirers to borrow heavily, which makes them the most sensitive to higher financing costs. Gray pointed to some of the very largest RIAs that are marked in the low to mid-20 times EBITDA multiple range.
“That’s probably the most logical place if they want to sell and they’re marked really high,” he said. “Now rates are higher and somebody needs to buy them. Can they run those numbers when they’re going to borrow however much to do that acquisition?”
Buyer depth is already an issue at the top end. Fidelity’s midyear M&A report found the median size of acquired RIAs rose from $517 million to $630 million AUM, while client assets involved in M&A jumped 88% to $343 billion even as deal count fell 9%, figures detailed in the finding that acquired RIA assets nearly doubled in 2026.
“If the seller’s enterprise value is $10 billion, there’s not that many buyers out there,” Gray said. “They’re great businesses. There are just fewer buyers.”
The upshot for growth sellers
For younger, growth-minded teams, Gray said a modest discount may be worth accepting if a larger platform helps them grow and offload work they would rather not do.
“They may be very willing to take a slightly lower price because of the higher rates, because over the long term they’re going to make a lot more money,” he said.
But however higher rates ultimately impact deals, he stressed that price should not be the deciding factor for any prospective buyer or seller.
“At the end of the day, the most important thing for all of these people is to pick the right partner,” Gray said. “If they sell to or partner with the wrong firm and it’s a bad fit for both sides, they’re in trouble regardless of the multiple and terms.”