Despite the effects of equity volatility, inflation and the war in Ukraine on the larger economy, wealth management M&A and other financing deals appear likely to set more records this year.
Under separate respective agreements unveiled
The PE deals for a rapidly growing RIA consolidator in Cerity’s case and a fast-expanding employee wealth manager in Snowden Lane reflect
“Capital is finding its way into our industry I think in very healthy ways in the sense that it wasn't that long ago when wealth and asset managers would have a hard time taking out debt because traditional financers had difficulty wrapping their heads around the certainty of cash flows,” said Brian Lauzon, managing director of investment bank InCap Group. “When someone's in the market looking to raise capital, not only do they have a lot of firms vying for it, but they also have a lot of variety in the type of financing, which I think is a healthy development.”
Continuing health in the wealth management M&A marketplace forms a contrast with the volume in other industries, which is down by double digits so far this year, according to John Eubanks, a director with investment bank Park Sutton Advisors. Eubanks’ firm itself is merging into a larger investment bank
“Wealth and asset management is still a play that these firms are willing to take a bet on,” he said. “A lot of the players that are in the wealth management space are here for the long term. … It's not like a whole subset of customers just disappears like you can have happen in some other industries.”
News outlet Citywire RIA first reported the financing deals struck by
In an interview, Snowden Lane CEO Rob Mooney explained that the New York-based firm and its majority owner of the past eight years, PE firm Estancia Capital Partners, picked the add-on to the company’s credit facility through Orix over several bids to buy the firm in the fourth quarter of last year and the first few months of 2022. Orix, a Tokyo-based firm with a substantial U.S. arm, had previously provided Snowden Lane with a loan of $20 million in 2018.
As a firm known for catering to wirehouse breakaways, Snowden Lane has been picking up a lot of incoming teams in recent years. The firm recruited advisors with a record $2 billion in client assets in 2021 and three more teams with $750 million so far this year. The term loan runs through 2025 without any of the equity in the firm changing hands, Mooney noted.
“The better choice for Snowden Lane was to stay the course and execute on what we think is the strongest recruiting pipeline in the history of the firm,” he said. “The main thing is it’s non-dilutive capital.”
The other deal saw two PE firms that have been mainstays of wealth management collaborating in a recapitalization of a company previously known as HPM Partners. Lightyear’s other past wealth management investments include
When Lightyear
“Our partnership with Genstar Capital allows us to continue enhancing value to our clients, colleagues and communities, as well as accelerating the development of our vision for becoming a first-of-its-kind global professional services firm in wealth management,” CEO Kurt Miscinski said in a statement.
Negotiations for deals such as Cerity’s recapitalization haven’t seen much ricochet effect from the conditions in the larger economy, according to InCap’s Lauzon.
“Revenues are highly dependent on the value of the stock market. We've seen some buyers looking to sort of hedge their bet a little bit because revenues are down,” he said. “When we're representing the sellers, they built their businesses over the course of 20 years. They can’t haircut the value of their business because markets have been down in the past two months. Revenues are impaired temporarily. There's been no shortage of enthusiasm.”
