A recent capital infusion is already paying off with new deals for Focus Financial Partners, which this week added some Louisiana seasoning to its growing national profile.
The New York-based roll-up firm has taken an ownership stake in Summit Financial, a $600 million independent RIA based in Lafayette, La. -- the heart of Cajun country. Neither party disclosed the terms of the deal, which brings the total number of Focus partnerships around the country to just under 30.
A key factor in the deal was Summit's desire to expand establish itself as a regional power in the Southeast, leveraging its location between New Orleans and Houston.
"We were attracted to Focus' access to capital and their expertise in identifying and structuring deals," says David Daniel, managing partner at Summit. "It's something we've tried in the past and haven't been successful with. We see Focus helping us expand throughout the Southeast to acquire like-minded practices, whether they're RIAs or breakaways."
ACCESS TO CAPITAL
The deal gives Summit access to some of the $400 million in capital funding, with another $150 million set to come, that Focus received earlier this year from a consortium of large banks.
"We now have the deepest pockets in the industry," maintains Focus founder and CEO Rudy Adolf. "Summit and our other partners will full access to that capital, as well as our expertise in supporting over 40 mergers, to enable them to have growth opportunities that weren't available to them previously."
Summit, which was affiliated with Wells Fargo Advisors Financial Network for nearly eight years, was founded in 2003 by Daniel and Fred Werner, another former Legg Mason advisor. Todd Lambert and Michael Pharr are also partners in the firm.
Adolf says the Summit deal is the ninth transaction for Focus in 2014, which has more than $70 billion in total client assets. Focus' merger and acquisition pipeline is shaping up to be "very, very strong" for the rest of the year, he adds.
Adolf also predicts an industry-wide uptick in breakaway broker transactions. "Not a single wirehouse is earning its cost of capital," he says.
With a raft of retention deals expiring, he says, wirehouses won't be able to afford the generous packages needed to keep brokers from leaving.
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