M&A blockbuster: NFP buying Bronfman Rothschild

The RIA business will soon have a new $11 billion wealth management behemoth.

NFP, one of the original RIA aggregators in the early 2000s, has jumped back into the sizzling M&A market in a big way, agreeing to acquire the $6 billion advisory firm Bronfman Rothschild.

An insurance broker, employee benefits consultant and wealth management conglomerate, NFP will combine Rockville, Maryland-based Bronfman with another RIA that it owns, Sontag Advisory. Sontag is based in New York City and has over $5 billion in AUM.

Bronfman, which itself had been a major M&A buyer through 2017, was “open to a strategic combination,” says president and chief operating officer Mike LaMena. LaMena has been running Bronfman since last year, when CEO Neal Simon took a leave of absence to run for a U.S. Senate seat in Maryland.

“Size and scale matter, and there was a strong business and cultural fit with Sontag,” LaMena says, “With NFP’s support, we think it will be a great way to help us grow and serve clients.”

The combined Bronfman-Sontag firm will “absolutely” be an RIA buyer, he says.

Howard Sontag, who founded Sontag Advisory in 1995 after 12 years with investment banker Lazard Freres, will become chairman of the combined firm, which will be rebranded after the deal is set to close in the second quarter of the year.

LaMena, who joined Bronfman in 2017 after seven years at HighTower Advisers and 14 years at Morgan Stanley, will become CEO. Eric Sontag, Howard’s son, will become president and chief operating officer. Current Sontag CEO Michael Delgass will head the combined firm’s northeast offices and report to LaMena.

Simon, who sold Highline Wealth Management to Bronfman in 2015 and was one of Bronfman’s largest shareholders, will not be involved in the new company.

Simon, an independent, lost his Senate race but says he will remain in politics pursuing electoral reform, working with groups including Unite America, Open Primary and Fair Vote.

Operations and technology consultant Matt Sonnen, CEO of PFI Advisers, says he was surprised that Bronfman would give up its brand name. Still, the the RIA’s decision to turn to a larger entity with deep pockets to keep pace with industry leaders, was not shocking, he adds.

“Everybody needs more firepower,” Sonnen says. “This shows that the RIA M&A gold rush is not over.”

Industry consultant Jamie McLaughlin is more skeptical.

Bronfman may have been a motivated seller, McLaughlin says, but he questions the motives of NFP and Madison Dearborn, the Chicago-based private equity firm that owns a controlling interest in the company.

“How patient is Madison Dearborn? Why buy Bronfman now, when multiples are at historic highs?” McLaughlin asks. “And what’s NFP’s strategy? They’ve had zero success integrating their core insurance producer firms with their wealth management firms.”

To be sure, NFP has had an uneven history when it comes to buying independent advisory firms.

Under the guidance of then-CEO Jessica Bibliowicz, daughter of famed Wall St. financier Sandy Weill, NFP was one of the first RIA aggregators. In addition to buying up insurance producers and corporate benefits firms, the company, which went public in 2003 as National Financial Partners, also targeted independent broker-dealers and independent advisory firms.

In return for NFP stock, advisors sold off a percentage of their practices. By October 2007, the stock, which went public at $23 a share, had more than doubled, reaching $54 a share. But after the following year’s financial crisis, shares tumbled to a little more than $1.

NFP fell out of favor with financial advisors and also faced some legal troubles. Then-New York Attorney General Eliot Spitzer had subpoenaed NFP seeking information about sales of brokered insurance policies and the company had also become embroiled in nationwide crackdown on sales of life settlements.

Revenues declined. In 2013, Bibliowicz stepped down and private equity firm Madison Dearborn agreed to buy NFP for $1.3 billion.

The company, now led by CEO Doug Hammond, kept a hand in financial services.

It bought Fusion Advisor Network in 2012 and the remaining 40% of Sontag that it didn’t already own in 2014, in addition to its ownership stake in Lenox Advisors, another New York-based RIA.

NFP also owned NFP Advisor Services Group, one of the largest independent broker-dealers in the industry in 2015, with over $450 million in gross revenue and nearly 1,400 reps. NFP sold the IBD unit to private equity firm Stone Point Capital in 2016, which changed its name to Kestra Financial.

Last month Stone Point sold its majority stake in Kestra to Warburg Pincus, another PE firm. Stone Point is also an institutional investor in NFP.

Hammond, who is still NFP’s CEO, told Mergermarket last November that the company would be an aggressive buyer of property and casualty life insurance companies as it attempted to “balance out” its revenue mix. Corporate benefits consulting now makes up 55% of the company’s revenues, with 25% coming from insurance and 20% from wealth management, according to Mergermarket.

But the Bronfman deal signals that wealth management will also be in the M&A mix going forward.

NFP will continue to “seize opportunities across all our businesses to strengthen capabilities and increase scale,” Hammond said in a statement. “[The Sontag-Bronfman combination] will drive tremendous growth in our wealth advisory business.”

La Mena agrees.

“As consolidation continues, there will be opportunities to get much bigger,” he says.