What summer doldrums? Focus Financial Partners, one of the countrys largest RIA aggregators, has made its second major deal in two weeks and fifth of the year, boosting its total assets to over $60 billion spread over 27 firms.
The latest Focus catch is a big one: Southfield, Mich.-based Telemus Capital Partners, which provides investment management, financial planning, retirement and estate planning, life insurance and tax consulting to nearly 600 clients across the country. The firm has more than $2.2 billion in client assets.
Telemus was founded in 2005 as a breakaway by former Merrill Lynch and UBS Financial Services executives Gary Ran, Bob Stone, and Lyle Wolberg. All three partners will be staying with the firm.
Terms of the deal were not disclosed, but Focus business model is to offer a combination of cash and stock to owners of firms joining the fold.
Last week Focus acquired another Michigan firm: Grand Rapids-based, LaFleur & Godfrey, which has more than 200 clients and $400 million in client assets.
And just last month, Focus agreed to a $216 million stock buyout from Centerbridge Capital Partners. The buyout, says Focus founder and chief executive Rudy Adolf, was created as a liquidity event giving Focus shareholders the option to sell all or part of their stake to Centerbridge -- now the largest Focus shareholder.
We did not do the deal with Centerbridge to raise capital for Focus, Adolf says. Focus is very profitable and does not need any capital. ... We did this to give our partners and private equity investors an opportunity to sell some of their ownership to Centerbridge.
The Centerbridge deal, which requires shareholder approval, is expected to close at the end of the third quarter.
PRIVATE EQUITY RISK?
Some industry observers question whether Centerbridges controlling interest will spark a conflict between the perceived short-term interests of a private equity firm and the longer-term growth strategy favored by Focus other shareholders -- the executives who run the companys advisory firms.
Adolf dismisses the question out of hand. Theres absolutely zero concern, he says. Centerbridge is a very sophisticated investor and they know the way weve been building the business is the right way ... Theres very good alignment" between Centerbridge and the other shareholders," he adds.
As chief executive, Adolf says he has less access to liquidity than other shareholders; he says he does plan to sell some of my ownership, but will continue to be a huge shareholder.
Summit Partners and Polaris Venture Partners, the two largest outside investors in the firm, will also sell some of their stake to Centerbridge, according to Adolf.
The Telemus deal is "good for advisors, says RIA industry consultant John Furey, principal of Advisor Growth Strategies. As deals like this continue to get done, the environment for additional capital entering the market should improve," Furey explains. Such deals will bring additional confidence to wirehouse advisors that are seeking to go independent and build true business value," he adds.
Focus recent spate of deals underscores the companys position as the market leader as RIA firms race to build out a national footprint. Others may like to talk about [national aspirations], but nobody except for us has managed to establish a national presence, Adolf says. Unless you have the resources to execute such a strategy, its really a hollow hope.
Yet industry consultant Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy, says the deal also shows that even the largest, most successful aggregator is growing slowly.
When everyone was predicting the consolidation of the industry a few years back and the dominant role that the aggregators would play, Welsh says, the reality is that it is still just a drop in the bucket -- 27 firms down, 20,000 to go.