Kestra to recapitalize under its previous private equity owner

Kestra Holdings will say goodbye to its majority owner of the past five years while ushering a previous private equity investor back into the fold.

Funds managed by Stone Point Capital secured an agreement to acquire the majority of Kestra — an independent wealth management firm with holdings that include a midsize brokerage, a hybrid registered investment advisory firm for wirehouse breakaways, a succession and M&A unit, an asset management and research arm and a trust company — the firms said Oct. 15. In 2019, the same private equity firm had sold its majority interest in Austin, Texas-based Kestra to Warburg Pincus. The Stone Point funds maintained a minority interest in Kestra until 2022, when another private equity investor, Oak Hill Capital, purchased the smaller stake in the firm.

The parties didn't disclose the exact percentage of equity that the Stone Point funds will acquire, how much they will pay for the majority stake or the valuation of Kestra in the transaction, which is subject to regulatory approval and expected to close in the first quarter of 2025. In a press release, Kestra pledged that there will be "no impact to Kestra Holdings' employees, financial advisors or operations" and no repapering movement of client accounts as part of the deal.

"We're pleased with the successful partnership we had with Warburg Pincus and are excited to once again partner with Stone Point," James Poer, the CEO of Kestra Holdings, said in a statement. "Stone Point's expertise and partnership previously helped propel us along a successful path to establishing our unique value proposition — to support successful wealth management businesses with full and deep value while focusing on the life cycle of their entrepreneurial efforts. Today, our priorities are to strengthen that value proposition as we continue building a destination of choice for independent, successful wealth management businesses and professionals."

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News outlet Citywire reported last week that Warburg Pincus was seeking to sell its majority stake in Kestra.

Kestra's independent brokerage and RIA businesses consist of 1,700 financial advisors with $117 billion in client assets under advisement, including $66 billion in assets under management. In 2023, the firm generated $719.6 million in revenue as the No. 12 firm on Financial Planning's annual IBD Elite rankings. Five years earlier, just before Warburg purchased the majority stake then held by Stone Point's funds, Kestra reported annual revenue of $590.1 million — or a hike of 22% over the past five years. That's despite spinning off a midsize independent brokerage called H. Beck that Kestra purchased in 2017, later rebranded to Grove Point Financial and sold in 2023 in a deal with Atria Wealth Solutions.

"Our partnership with James [Poer] and the talented team at Kestra has been exceptional," Jeff Stein, a managing director and Warburg's head of U.S. financial services, said in a statement. "Kestra has built a world-class platform, and we are confident that the organization will continue to thrive with Stone Point and Oak Hill as partners."

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At the time of its first investment in Kestra in 2016, the Stone Point funds purchased the majority stake in Kestra from NFP in one of the earlier moves by insurance companies to divest from their wealth management holdings. AIG sold the company then known as Advisor Group (which is now called Osaic) that same year. In the years since then, companies such as John Hancock, Securian Financial Services, Lincoln Financial Group and Voya have all followed suit — with private equity-backed firms often on the other side of the transactions. 

"We are thrilled to partner once again with James and the Kestra management team," Fayez Muhtadie, the co-head of private equity at Stone Point, said in a statement. "We believe Kestra is a highly differentiated platform in the independent wealth management space and are excited to continue to strengthen Kestra's value proposition and propel growth for the financial advisors it serves."