Surprise $3B RIA Deal Adds to M&A Boom
The RIA industry's M&A boom isn't taking a summer break.
In a surprise move, Bronfman E.L. Rothschild acquired Highline Wealth Management, creating a newly-minted $3 billion-plus advisory firm.
The Bronfman-Highline deal is the 74th RIA M&A transaction this year, according to industry consultant David DeVoe, compared to 50 transactions executed through August 11 last year and 25 during the same period in 2013.
Bronfman E.L. Rothschild entered the wealth management market two years ago when it bought Baker Tilly Investment Advisors, formerly a wholly-owned subsidiary of Chicago-based accounting firm Baker Tilly Virchow Krause. Earlier this year Bronfman bought Lake County Wealth Management, a small Wisconsin-based RIA.
Highline, however, has itself been an aggressive consolidator for the past several years. Founded by Neal Simon in 2002 and based in Rockville, Md., Highline has closed half-dozen deals of its own, steadily rising to over $1 billion in AUM. Simon will become CEO of the combined firms and join the Bronfman E.L. Rothschild Executive Management Committee.
"This is a big deal for the industry," says DeVoe, managing partner of San Francisco-based DeVoe & Co. "Bronfman E.L. Rothschild is achieving critical mass on an accelerated basis and gaining a seasoned CEO in the process. It's a great example of how RIAs are using M&A to achieve several business goals in a single transaction."
Terms of the deal were undisclosed, but was valued on a cash flow basis and paid out in cash and stock, says Eli Goldstein, partner at E.L. Rothschild. Highline was a "really compelling fit" for Bronfman, according to Goldstein: "We found we had similar cultures, investment philosophies and ways of doing business."
The deal brings Highline additional scale, a larger geographic footprint and access to new funds and other investment products, according to Simon. "We did it because it's good for our business, our clients and our employees," he says.
Highline will be re-branded as Bronfman E.L. Rothschild by the end of the year.
Expect Bronfman to stay on the prowl.
"We love this business and we have capital," says Matthew Bronfman, chairman of the Bronfman E.L. Rothschild board of directors. "We expect to grow organically, by hiring other good advisors and by more corporate transactions."
The combined firms currently have 32 advisors.
Bronfman E.L. Rothschild will target the northeast corridor, specifically New York and Philadelphia, for further acquisitions, Bronfman says, as well as Chicago and the rest of the Midwest, where the firm already has six offices.
The new firm will have an average client size around $4 million to $5 million in investable assets and won't set any minimums, according to Bronfman. "We want to be able to have clients grow with us," he says.
Some industry observers have been puzzled by the seeming incongruity of the prestigious House of Rothschild brand, synonymous with great wealth, not focusing on the high end of the U.S. wealth market. But Goldstein insists that the private investment firm also strives to make a "meaningful impact on a broad spectrum of people."
Market conditions continue to be "extremely fertile" for M&A activity, according to DeVoe.
"The economy and stock market have maintained overall positive momentum, there are a high number of well-financed buyers and few tangible risks on the horizon," he explains. "Valuations are high and buyers are motivated. Smart sellers realize that if there is strategic merit to doing a transaction today, then the maxim 'make hay while the sun shines' applies."