A global wealth management firm's special purpose acquisition company will give financial advisors and the public a new foothold in an emerging area.
Kingswood Acquisition
The new disclosures, which include an
SPACs, also known as "blank check companies," take firms public as part of an acquisition financed by the underlying investors. In this case, the investors are the major shareholders of London-based wealth and asset management
Roughly 1,900 advisors managing about $25 billion in client assets with PKS and two other small brokerages owned by Wentworth will keep the same basic setup under a new publicly traded parent firm and benefit from the capital influx, according to Binah Executive Chairman Larry Roth. The former CEO of independent wealth managers Cetera Financial Group and Advisor Group views hybrid RIAs as "the jet stream in wealth management" because of
"From an advisor's perspective, nothing changes," he said. "We're bringing more capital into the business so we can help them grow their practices and build out the technology."
The use of SPACs has declined rapidly over the past year amid slumping stock values and a plunge in initial public offerings. Dynasty Financial Partners
The close of the merger creating publicly traded Binah has moved back from its initial expected date in the fourth quarter of 2022, but it's going forward. A handful of other wealth management-related
As of August, 15 SPACs unveiled anticipated mergers totaling a collective $6 billion in value,
A merger through a SPAC "doesn't go through the same due diligence process" with all of the "checks and balances" of a conventional IPO, said Brian Lauzon, the managing director of M&A advisory firm InCap Group. But the financing method provides sellers in the underlying deal with more visibility into the price of the asset than a standard IPO, he said.
"You can get to market quicker by merging into SPAC versus doing the full IPO process," Lauzon said.
He noted that "the need is clearly there" in the industry for hybrid-friendly brokerages like PKS and a handful of others servicing the small sliver of commissionable transactions and legacy products managed by
Wentworth and Kingswood plan to raise $30 million in convertible preferred equity capital and $24.2 million more in debt notes with the deal, according to the investor presentation. On a trailing 12-month basis, Wentworth generated $12.2 million in earnings before interest, taxes, depreciation and amortization in 2022 on $183.7 million in revenue. More than three quarters of the business came from sales-based or trailing commissions. The number of registered representatives with PKS and the other brokerages jumped 47% over the prior three years to 1,931, which helped to boost the firm's annual revenue 46% in that span.
"The U.S. wealth management landscape is highly fragmented and is among the few remaining sectors in the financial services industry to continue to experience significant consolidation," the presentation said. "Wentworth believes it is well-positioned to capitalize on the market fragmentation by offering independent managers a platform they can leverage to access asset gathering opportunities that would not otherwise exist on a standalone basis."
The presentation cites a pipeline of four incoming firms with a total of roughly 460 reps and $53 million in annual revenue that are poised to use PKS or another brokerage under Wentworth's umbrella. Well-known RIAs and networks that use PKS include Focus Financial Partners, Mercer Advisors, Dynasty, Beacon Pointe Advisors and Journey Strategic Wealth.
"They provide a ton of great services for advisors, but they're not in the brokerage business," Roth said. "So they send their advisors to PKS."
As executive chairman of Binah, Roth is keeping his other role as an industry consultant
