Almost two years after it was announced and 15 months after the expected close date, one of the most complicated wealth management transactions in recent memory is now complete.
Binah Capital Group will begin trading on the Nasdaq exchange on March 27 under the ticker symbol "BCG" after its creation earlier this month through Kingswood Acquisition's purchase of independent broker-dealer holding company Wentworth Management Services. The rare initial public offering amid a wave of wealth management firms going private represents a bet by London-based Kingswood on more than 500 so-called hybrid registered investment advisory firms that operate independently while using Purshe Kaplan Sterling Investments as their brokerage. Wentworth purchased PKS Investments, a leading "hybrid-friendly" brokerage in 2017. It also owns Cabot Lodge Securities, Broadstone Securities and World Equity Group.
In sum, the parent company of brokerages working with about 1,800 financial advisors in 535 independent offices across the U.S. that manage about $23 billion in client assets is a publicly traded firm with a "pro forma enterprise value of $208 million," according to the firm's announcement last week. A February prospectus explains numerous risk factors and steps taken by Binah management since the July 2022 announcement and the deal's delayed close date. When asked about the protracted timeline, Binah CEO Craig Gould didn't cite any specifics beyond the falling number of publicly traded firms.
"It is harder to go public than it was 20 years ago. It's time-consuming, it's expensive and it's grueling," Gould said. "It was an important process for us, given our business plan."
READ MORE: Goldman Sachs netted $349M 'gain' from Creative Planning deal
For the wealth management industry at large, the IPO is testing whether the hybrid RIA model that is often closely associated with LPL Financial could fuel investments in a smaller public company.
Many industry observers have predicted that LPL's fast-growing rivals Osaic (formerly Advisor Group) and Cetera Financial Group are amassing size through acquisitions and organic growth in order to imitate LPL's 2010 playbook when private equity investors took it public. To date, neither firm has publicly indicated any IPO is imminent.
Meanwhile, AlTi Tiedemann Global's listing on the Nasdaq last year as a global multifamily office and investment manager stood in sharp contrast to Focus Financial Partners going private, Avantax's stock leaving public exchanges with Cetera's purchase of the firm, Creative Planning's acquisition of the former United Capital from Goldman Sachs and Dynasty Financial Partners dropping its IPO plans.
Binah's IPO suggests that they could still be "viable in the independent broker-dealer space," according to Brandon Kawal, a principal with management consulting and transaction advisory firm Advisor Growth Strategies.
"Wentworth aggregated and tried to build efficiencies through independent broker-dealer platforms," Kawal said in an interview. "It tells me, over the long haul, maybe there is a path where the public markets recognize the value. I don't think the IPO is dead, I just think it's in hibernation for a while in the wealth space."
Kingswood Acquisition formed in November 2020 as a special-purpose acquisition company that raised $115 million in its own IPO. Prior to that transaction, the firm had purchased a different brokerage and RIA called Chalice Wealth Partners. Kingswood has "ambitious plans to become a leading global provider of wealth management services" with "a growing network of offices across the United Kingdom and the United States," according to the firm's website. Separately, another American firm that is owned by Kingswood but isn't publicly traded or involved in the Wentworth-Kingswood deal, Kingswood U.S., has more than 200 advisors using the Kingswood Wealth Advisors brand. In all, London-based Kingswood and its multiple entities oversee more than $13 billion in global client assets.
READ MORE: Kingswood SPAC making a novel bet on hybrid RIAs
Starting in December 2021 in the initial consultations between Kingswood Acquisition and Wentworth, the Binah prospectus discusses many drafts of the merger agreement and due diligence evaluations on both sides. For the nine months that ended on Sept. 30, 2023, Kingswood Acquisition generated just $558,000 in total revenue, while Wentworth produced $126.7 million, the document stated. In 2022, Wentworth's revenue increased 4% year over year to $178.8 million.
"The wealth management industry is highly competitive," according to the disclosure. "We compete for opportunities and the professionals in our network compete for clients, advisers and other personnel, with public and privately held investment advisers, traditional brokerage firms and wirehouses, firms associated with securities broker-dealers, financial institutions, private equity firms, asset managers and insurance companies, many of whom have greater resources than we do."
Gould is leading the newly combined firm. The former CEO of Wentworth, his prior 25 years of experience include tenures as the founding president of Cabot Lodge, the president of another brokerage called Fintegra and the national sales manager for Wunderlich Securities.
The four brokerages previously owned by Wentworth will remain separate independent subsidiaries under Binah that have their own respective relationships with Fidelity Investments' clearing and custody units, as well as those of Pershing, RBC and Raymond James, Gould noted. Binah is currently negotiating with Wells Fargo's First Clearing in order to be able to offer a fifth custodial option, he said.
The more than 500 standalone RIAs using PKS Investments for brokerage services include some in the Focus and Dynasty networks, along with Concurrent Advisors and others that have sold minority stakes to Merchant Investment Management.
"This transaction was part of our business plan to be the leader in the hybrid-friendly space," Gould said. "We plan on being there and being able to provide them the tools and capital to allow them to continue to build their businesses."
