KKR to supercharge Beacon Pointe’s growth at valuation above $1B

Less than six months after selling its stake in a big RIA consolidator, one of the biggest names in private equity is betting again on a smaller but fast-growing independent wealth manager.

KKR, the publicly traded global investment firm known as a pioneer of the leveraged buyout, is buying a stake in Beacon Pointe, the parent company of RIA consolidator Beacon Pointe Advisors, the firms announced on Nov. 15. The parties expect the deal of an undisclosed size to close by the end of the year. Newport Beach, California-based Beacon Pointe will retain more than 50% control while its prior PE backer, Abry Partners, is exiting its March 2020 investment after its capital helped double the size of the RIA consolidator’s assets under management over the past 18 months. The deal marks at least the third RIA consolidator to receive a valuation of at least $1 billion in 2021 under recapitalizations with PE firms.

Beacon Pointe’s incoming backer, KKR, cashed out its more than 7 million shares in rival Focus Financial Partners at a value of more than $359 million in June. With eight transactions so far in 2021, Beacon Pointe has emerged as the fourth-most active consolidator in the industry this year behind Focus, Wealth Enhancement Group and Mercer Advisors, according to investment bank and consulting firm Echelon Partners. At $20 billion in assets under management and more than 110 advisors, Beacon Pointe has previously shared a goal of reaching $200 billion in AUM in the next five years. KKR could help it along the way.

“Like many private equity firms, they want to be part of the consolidation play, and Beacon Pointe is a tested entity in that world,” said Brian Lauzon, managing director of M&A consulting firm InCap Group. “They've been able to grow inorganically very successfully.”

Industry News

Beacon Pointe sets sights on becoming $200 billion mega firm

August 17, 2021 8:26 PM

Increasing levels of wealth in the U.S. and globally, along with generally rising equities and growing competition amid the record M&A volumes of the past several years, are pushing up valuations across the industry, according to Lauzon. Two PE competitors to KKR in Bain Capital and Onex Corporation each purchased minority stakes earlier this year in two other Beacon Pointe rivals, Carson Group and Wealth Enhancement Group. Bain’s deal with Carson gave the RIA a valuation of $1 billion, while Wealth Enhancement received an equity valuation of $2.05 billion when a PE fund affiliated with Onex paid $226 million for “economic ownership” of 11%.

It wasn’t immediately clear how much KKR paid for its position in Beacon Pointe, exactly how much of the firm it’s buying or what specific valuation above $1 billion that the deal assessed for the RIA consolidator. Representatives for outgoing seller Abry Partners didn’t respond to an email.

The other parties didn’t make any executives available for an interview, but Beacon Pointe CEO Shannon Eusey, President Matt Cooper and Chris Harrington, the KKR partner leading its investment team, answered emailed questions about the agreement. KKR is picking up about half of Beacon Pointe’s equity at close, with management keeping the majority.

Beacon Pointe “considered multiple prospective partners” before selecting KKR as “the best strategic partner to help us achieve the most compelling overall opportunity for our clients, our team and our shareholders,” Eusey said, noting the ability to create a Beacon Pointe charitable fund as an additional point in KKR’s favor.

The New York-based firm previously known as Kohlberg Kravis Roberts came out the ultimate winner in the chaotic 1989 buyout of RJR Nabisco immortalized in “Barbarians at the Gate.” These days, KKR has AUM of $459 billion and stakes in 109 firms in a private equity portfolio that generated a combined $244 billion in annual revenue last year. More than 19 million retirees and pensioners have exposure to KKR in their portfolios.

Besides its Focus deal, KKR has a position worth $992 million in the fintech and payments giant Fiserv, according to its third-quarter earnings statement. In February, KKR closed on its purchase of 61.5% of insurance and retirement firm Global Atlantic Financial Group for $4.7 billion. With a total of $102 billion in new capital raised in the first nine months of the year, KKR has more than doubled its record total for the entire year last year. Its funds have dry powder for future investments of $111 billion, nearly two-thirds more than the same time a year ago.

“Beacon Pointe stood out for its entrepreneurial management team, tremendous track record, exciting vision for growth and differentiated approach to wealth management," Harrington said. "Beacon Pointe has the right model and team to capitalize on the significant opportunities that we see in the RIA sector, and we look forward to partnering with Shannon and the leadership team to achieve their growth strategy.”

The RIA expects to close several more acquisitions by the end of the year, putting it on a record pace for the 20-year-old firm. For the year to date across the industry, dealmakers are executing transactions at a record clip in terms of the volume of acquisitions and the average AUM of sellers, according to Echelon. Continued organic growth and further M&A deals “to the extent we can find great people who share our values and are additive to our culture” will expand Beacon Pointe’s beyond its current footprint of 27 offices with 10,000 clients, Cooper said.

“We anticipate being able to add several new firms and several billions of AUM per year over the next several years,” he said. “An IPO is not on the radar at this time. We’re focused on executing and doing our jobs each day. We have a lot of building to do before we even consider something like that.”