KKR to acquire Janney and its $150B in client assets

Global private equity and investment firm KKR secured an agreement to take another dip into wealth management by purchasing Janney Montgomery Scott for an undisclosed amount.

As a regional employee brokerage, investment banking and asset management firm, Philadelphia-based Janney has 135 offices with 900 financial advisors managing $150 billion in client assets. For the past 42 years, Penn Mutual Life Insurance has owned Janney. 

Other recent investments by KKR in and adjacent to wealth management include Beacon Pointe, Global Atlantic Financial and Focus Financial Partners. The deal displays a continuing belief in the profitability of wealth management investments among private equity firms, regardless of any economic headwinds.

"Janney's well-respected brand, client-centric culture and strong track record of growth have established it as a best-in-class business that we believe is well-positioned to benefit from the significant tailwinds driving demand in the U.S. wealth management market," KKR Partner Chris Harrington said in a statement when the deal was announced July 23.

READ MORE: KKR to supercharge Beacon Pointe's growth at valuation above $1B 

KKR and Penn Mutual anticipate the deal will close in the fourth quarter. At that point, each of Janney's 2,300 employees will have the opportunity to participate in an equity ownership program at KKR. For its part, Penn Mutual followed other insurance firms that have confronted rising regulatory and technology costs by selling their wealth management units in the last few years.

"This is a great outcome for both Janney and Penn Mutual," Penn Mutual CEO Dave O'Malley said in a statement. "Janney has been a strong investment for Penn Mutual's general account for the last 40 years. We have been good stewards and are looking forward to watching Janney's next chapter of growth." 

Besides its ranks of advisors as an active recruiter of wirehouse teams, the firm has achieved 144 consecutive quarters of operating profitability with more than 500 investment banking transactions since 2013 and 250 capital markets professionals, according to its website.

"We are excited to enter this next chapter in our nearly 200-year history with a new value-added strategic partner," Janney President Tony Miller said in a statement. "We look forward to working with KKR to invest further in our growth and enable our talented team to further improve the advice and services we offer our clients."

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Miller took over the reins of the firm at the beginning of last year, when longtime CEO and President Timothy Scheve moved into the role of chairman. Over Scheve's 15-year tenure, the firm's annual revenue soared by 127% to a record $980.8 million in 2022, according to Janney.

The deal "should further strengthen the company's extremely strong balance sheet, which is partially offset by reduced earnings," according to a note after the announcement by Fitch Ratings Senior Director Jamie Tucker. With a boost from high interest rates, Janney became "a more material earnings contributor over recent years" to the point that it comprised more than 15% of Penn Mutual's operating earnings, Tucker noted. 

"Fitch views the sale as opportunistic, allowing Penn Mutual to monetize the strong results and support organic life insurance growth," he wrote. "Janney was minimally integrated with the broader Penn Mutual enterprise and sold a de minimis amount of Penn Mutual's life insurance and annuities. Following the sale, Janney will become a standalone private company that will continue to operate independently."