Yes, the merger of New York-based Tiedemann Wealth Management and San Francisco-based Presidio Capital Advisors is one of the most significant wealth management deals of the year.
But how big a deal is it really?
The combined firm, which will operate under the Tiedemann name, was touted as having "approximately $13 billion in assets under advisement."
According to the most recent Form ADVs filed with the SEC, Presidio, a subsidiary of The Presidio Group, has $4 billion in assets under management and Tiedemann has $4.9 billion.
The remaining $4.1 billion, according to Michael Tiedemann, chief executive of Tiedemann Wealth Management, includes assets the firm advises on as an administrative trustee, consultant and "custoding [or] working around or selling down over time single stock positions.”
The assets are held by the firm "or if not at TWM the assets are under our oversight via consulting," Tiedemann emailed.
The wealth management firm also owns Delaware-based Tiedemann Trust Company, Tiedemann points out, adding that part of the AUA "covers the balance of roles we play for families."
AUM VS. AUA
Assets under management and assets under advisement are "not the same," notes Knut Rostad, president of the Institute for the Fiduciary Standard.
"AUM has a level of responsibility that is different from AUA," Rostad says. "Assets under management must be reported to the SEC and are defined as the value of those securities portfolios for which [the adviser] provides continuous and regular supervisory or management services.”
Assets under advisement "depend largely on the nature of the advisement of the assets," he explains. "You'd have to see the engagement agreement to see what the firm is going to do for the client and what they will be compensated for.”
To be sure, a cross-country merger resulting in a wealth management firm with $9 billion in AUM is a major event.
Tiedemann will now have offices in most of the largest wealth markets in the country, including California, New York, Texas and Florida. The recast firm will offer stronger competition to upper-strata of Ultra High Net Worth firms, including Aspiriant, Silvercrest Asset Management, SCS Financial Services, Veritable, Hall Capital Partners, and BBR Partners.
'STILL A MEGA FIRM'
"This is a signature deal for the industry between two estimable firms serving like-kind complex UHNW clients in what is now a national footprint," says Jamie McLaughlin, an industry consultant specializing in the UHNW market.
David DeVoe, managing partner of DeVoe & Co., a San Francisco-based consulting firm specializing in mergers and acquisitions, agrees.
"Even at 9 billionish, Tiedemann still becomes a mega firm and one of the small segment of RIAs who are serving the $20 million-and-up client," DeVoe says.
Tiedemann clients must have at least $20 million in investable assets, a minimum that is "likely to remain that way," says Michael Tiedemann, who will be CEO of the combined firm.
The merger "increases the firm's investment talent level, adviser resources, planning expertise, and our ability to reinvest into systems and future talent," Tiedemann says. "And the geographic footprint is exceptional and complementary to both firms."
Terms of the deal were not disclosed. But Liz Nesvold, managing partner of Silver Lane Advisers, the investment bank that advised Tidemann, says it was a cashless transaction structured as an equity swap among the combined firm's partners.
"It's a big value opportunity play that should be nicely accretive for the principals," Nesvold says.
BUILD VS. BUY
Tiedemann, founded in 1999 by Carl Tiedemann, Michael's father, is respected for championing open architecture investing and quality service to its wealthy clientele "highly concentrated in the New York to Palm Beach axis," says McLaughlin.
But the firm's organic growth has lagged, as assets under management have increased only $800,000 from $4.1 billion in 2013.
Presidio's AUM growth has also faltered. The firm's assets under management dipped from $4 billion in 2011 to $3.5 billion at the end of 2013, and have only risen by $500,000 in 2.5 years.
Each firm decided that an M&A strategy would result in faster growth rather than rely on building organically.
Jeff Spears, a former Presidio adviser who is now CEO of Sanctuary Wealth Services, a San Francisco-based transition and outsourcing specialist for RIAs, thinks the strategy will work.
"Their business models are very similar and complementary," Spears says. "Tiedemann has a very impressive reputation for its trust work and Presidio has some of the most respected wealth managers in the Bay Area."
Both firms also have built up business development operations, he says.
"A lot of wealth management firms think if you build it they will come, but Tiedemann and Presidio have embraced the fact that you have to sell to get your name out there," Spears says.
Craig Smith, currently president of Tiedemann, will retain that role in the combined firm, and Brodie Cobb, founder, and CEO of The Presidio Group will join Tiedemann’s Board of Directors.
Jeff Zlot, who worked with Cobb to help establish Presidio in 1997 and has been one of the firm wealth management stars, will also remain with the new firm.