Focus going private at valuation of $7 billion

Focus Financial Partners' stint as a publicly traded company  is coming to an end after less than five years, with its board approving a deal to be acquired by a private equity firm.

The New York-based acquirer of registered investment advisory firms received a valuation of more than $7 billion in an agreement to be purchased by private equity firm Clayton, Dubilier & Rice at a cash price of $53 per share, Focus said on Feb. 27. Funds managed by another private equity firm, Stone Point Capital, will retain an undisclosed percentage of ownership in Focus while providing part of the equity financing for the deal.

The parties expect the deal, which is subject to regulatory approval, to close in the third quarter. The valuation of Focus and its network of 88 RIAs represents a significant spike from the reported potential purchase price of $4.1 billion when the parties announced that they were in exclusive merger negotiations earlier this month. At the time, experts had described that price as a relative bargain compared to the total combined value of the Focus RIAs.

"Focus represents an outstanding collection of leading RIAs and business managers, and our investment is predicated on having greater financial and operating flexibility as a private company in order to support and drive collaboration amongst these entrepreneurial partners," CD&R Partner David Winokur said in a statement.

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"We are excited to be continuing the journey with the Focus partnership," Stone Point Managing Director Fayez Muhtadie said in a statement. "We firmly believe in the secular tailwinds supporting the wealth management industry and that Focus, as a private company, will be even better positioned to capitalize and continue its track record of growth."

In its earnings statement for the fourth quarter, Focus disclosed net income of $125.3 million on revenue of $2.14 billion in 2022. The firm's profits soared by more than a factor of five from the prior year and its revenue surged by 19% on the impact of the growth of its RIAs last year despite slumping stocks and bonds. Focus also reported cash and equivalents on hand of $140 million and debt outstanding of $2.6 billion under its credit facilities.

"This transaction represents an important evolution in the resources we will have to invest, enabling us to increase the value we deliver to our partners and their clients," Focus CEO Rudy Adolf said in a statement. "Our diverse and growing partnership creates enduring advantages. We are uniquely positioned to capitalize on industry trends while offering the expertise and resources that help our partners provide differentiated service to their clients."

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Focus went public in July 2018 in a major milestone for RIAs a little more than a dozen years after launching as a company. Funds managed by Stone Point and another private equity investor, KKR, took the firm public after acquiring a majority of Focus for $2 billion in 2017. 

New York-based CD&R has a 45-year history as a firm with a primary focus on business and financial services, consumer and retail, healthcare and industrial investments in the U.S. and Europe and strategic partnerships with peers in India and China. In the financial sector, its current portfolio companies include global business and technology consultancy Capco and insurance acquisitions consulting and research firm Tranzact.