A private equity-backed acquirer of registered investment advisory firms made its largest deal yet, as the industry's succession crisis fuels consolidation and new transaction structures.
Akron, Ohio-based Sequoia Financial Group, already a 180-person team managing $10 billion, will add $5 billion in assets under management and 28 financial advisors and other employees with the acquisition of
Sequoia's
"They have told a number of their clients that they promised to serve them for multiple generations," Haught said, noting that resources in investment management, estate planning and other services at Sequoia convinced Zeke's executives that they could keep that promise. "It makes the firm more durable going forward," he added.
The megadeal contrasts with most succession plans by its size, but the challenge of passing firms on to
RIA platform Dynasty Financial Partners, which is better known in the industry as a provider of technology and operational services to nearly 50 advisory firms, has facilitated a dozen succession deals in its network over the past three years, according to Harris Baltch, the St. Petersburg, Florida-based firm's head of M&A and capital strategies. For many advisory practices, though, the many private equity investors
Alternative financing methods include tapping into the cash flow of an RIA's earnings for capital or using the savings from no longer paying a firm's retiring founder to speed up the payment for the book of business.
"There are a myriad of ways that you can think through affordability," Baltch said in an interview. "The cash flow being paid out to the second-generation advisors is typically not enough to service the annual cash flow needs of the first-generation sunsetting advisor. So then you need to think about other means."
As a giant multifamily office working with high net worth and ultrahigh net worth clients, Zeke's owners found their exit door with Sequoia, where they'll continue to be actively involved with the advisory practice's day-to-day operations. Antoian launched the firm in 2008 after long tenures in asset management as a founding member of Chartwell Investment Partners and a senior portfolio manager with Delaware Investment Advisers.
Smith, the firm's president, was previously a managing director at Goldman Sachs, where he was CEO of the firm's trust companies and part of the senior leadership of the Private Wealth Management unit.
"After a thorough search for the right partner, Sequoia emerged as the ideal firm to support Zeke's mission of serving multigenerational families," Antoian said in a statement. "Joining Sequoia's successful family wealth practice will help ensure our clients will be in great hands for generations to come."
In its
Upon close, the deal will double the size of Sequoia's family office division, which is one of its three units alongside its wealth management arm for clients with between $5 million and $25 million in investable assets and its investment advisory unit for those with below $5 million. Sequoia had only $4.7 billion in AUM at the time of Kudu's investment in 2020, compared to its expected size of roughly $15 billion after closing the Zeke transaction.
Wealth management M&A deals reached a record in 2022 for the 10th straight year with 340 acquisitions,
With
"While internal succession doesn't generate the same headlines as consolidation, we expect it will remain a preferred way for owners to exit, particularly if pricing and terms in external transactions become less favorable to sellers," Milam wrote. "Internal succession allows owners to hand-pick successors and avoid dealing with a new party. But, for one reason or another, many firms struggle to develop and implement an internal succession plan. A lack of an internal succession plan will continue to bring sellers to market and support deal activity."
