Advisor Group to sell for more than $2B in year's biggest deal yet

Another private equity firm is crowding into the independent broker-dealer sector — paying more than $2 billion to buy Advisor Group. The acquisition is poised to be the largest M&A deal of the year across wealth management so far, according to data analyzed by Financial Planning.

Reverence Capital Partners’ affiliated funds will purchase a 75% stake in the four-IBD, 6,500-advisor network from fellow PE firm Lightyear Capital and the Public Sector Pension Investment Board of Canada, the parties announced May 9. The selling firms bought Advisor Group from AIG in 2016 for an undisclosed amount.

The sellers and all other current shareholders will retain up to a 25% position in the IBD network under the deal, expected to close in the third quarter, according to the firms. They didn’t disclose financial terms of the deal, but a person familiar with the discussions said the price tag amounted to between $2.1 billion and $2.4 billion.

Goldman Sachs alums Milton Berlinski, Peter Aberg and Alex Chulack launched Reverence in 2013 with a focus on financial services. While Advisor Group would be its first IBD investment, its past and current portfolio firms include Russell Investments, Victory Capital and First Republic.

“Advisor Group is one of the premier wealth management platforms in the U.S. and together with Reverence Capital’s investment, wealth management expertise and industry relationships, the company is uniquely positioned to identify and tackle growth opportunities across the business,” Berlinski said in a statement.

• Strategic buyers
• M&A
• United Capital
• RIAs

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Advisor Group Executive Chairwoman Valerie Brown will remain an investor but retire from the executive role under the deal, according to the company’s news release. CEO Jamie Price will continue serving in his current position.

The parties also plan to set up an advisor recognition and retention program. The firm will reveal more details about the program between the signing of the definitive agreement and the deal's close.

“Winning in our book is our ability to continue to make significant investments in our business to give our advisors the technology, service and products they need to serve their clients in this fiduciary era and position their businesses for long-term success and growth,” Price said in a statement. “This transaction, which aligns Advisor Group with well-resourced financial partners, accomplishes just that, to the benefit of the financial advisors we’re privileged to serve.”

Private equity firms have helped fuel a record number of M&A transactions across wealth management for six straight years. The IBD sector in particular is gaining several new PE firm entrants willing to pay impressive sums for their footholds.

Global PE firm Warburg Pincus agreed earlier this year to buy a majority stake in Kestra Financial, with the deal reportedly valued at as much as $800 million. Genstar Capital paid $1.7 billion to buy its majority position in Cetera Financial Group in 2018, Bloomberg reported at the time.

Centerbridge Partners — another PE firm — came close to purchasing Advisor Group, according to a Bloomberg report last month. Earlier reports near the beginning of the year had also named Cetera Financial Group parent Genstar Capital as a potential suitor.

The ultimate winning bidder, Reverence’s website describes the firm as specializing in “thematic investing in leading global, middle-market financial services businesses through control and influence oriented investments.”

The firm also identifies several sectors as its main target for investments: bank and non-bank finance, insurance, capital markets, asset management, wealth management, financial technology and services and payments.

Advisor Group boosted its revenue by 21% to $1.7 billion in 2018 on the strength of three M&A deals, including the tuck-in purchase of John Hancock’s Signator Investors into Royal Alliance Associates. FSC Securities, SagePoint Financial and Woodbury Financial Services are its other IBD subsidiaries.