First Allied Holdings, an independent broker-dealer, is set to be acquired by a private equity company.
RCAP Holdings, a New York holding company managed by Nicholas Schorsch, William Kahane, Michael Weil, Peter Budko and Brian Block, announced Wednesday it signed a definitive merger agreement to buy all of the outstanding equity of First Allied.
First Allied, together with The Legend Group, manages over $32 billion in assets across 300,000 clients, 1,500 independent financial advisors and 500 branches nationally.
When the deal closes, San Diego-based First Allied, The Legend Group and their subsidiaries will continue to operate under their current management as part of RCAP's family of companies.
According to a press release, the deal will provide First Allied with "significant financial resources" to make "substantial investments in technology, add professionals and support personnel, expand its 401(k) and 403(b) platforms, and enhance advisor marketing and lead generation programs. "
The deal also enables RCAP, which has over $10 billion in assets under management, to expand its presence in the independent financial advisor segment.
"In 2007, my partners and I perceived an opportunity to build an open architected, wholesale broker/dealer to distribute best-in-class investment solutions," said Schorsch, RCAP's CEO and chairman. "Looking back on our first investment in the alternative investment sector, our timing could not have been more prescient. The industry had been, and is still, heavily scrutinized by regulators, investors and even certain sponsors largely for the right reasons in my opinion. But we discovered that continuous, thoughtful and shareholder-aligned improvements could go a long way. We insisted that every investment product distributed by our wholesale broker/dealer, Realty Capital Securities, LLC, closely adhere to our best practices; namely, pay for performance, plain language reporting and full transparency, alignment of interests between investors and management, lower fees, routine valuations and regular liquidity events."
Schorsch said RCAP sees "value and opportunity for growth in a paradigm shift toward a sustainable direct relationship between the mass affluent investor and their independent financial advisor."
"The acquisition of First Allied gives RCAP Holdings a top-notch management team, in our view, one of the premier independent teams in the industry," he said. "Our value-add to First Allied is in being the best financial partner we can be, while providing strategic insights and direction where we can be helpful."
Adam Antoniades, First Allied's CEO and president, said the deal gives First Allied access to "a well-capitalized platform tailored to provide the mass affluent, emerging high-net-worth, and retirement-focused investors with the next generation of industry-leading investment solutions focused on durable income and principal preservation. "
"Collectively, these investment solutions represent a significant competitive advantage in an increasingly crowded market of financial advice," he said. "RCAP Holdings' significant financial support also provides us the ability to accelerate implementation of key initiatives.
As part of the deal, Lovell Minnick Partners, a private equity firm focused on the financial services industry, will sell its majority interest in First Allied. First Allied's senior management and other employee shareholders have committed to $10 million in going-forward equity in RCAP.
RCAP focuses on the retail direct investment industry and owns a direct majority economic interest in Realty Capital Securities, LLC, a FINRA registered wholesale broker/dealer and an investment banking and capital markets business, American National Stock Transfer, LLC, an SEC registered transfer agent, and RCS Advisory Services, LLC, a transaction management services business.