Prime Capital to accelerate growth after latest private equity infusion

A hybrid registered investment advisory firm that has grown nearly tenfold over the last half-dozen years received a private equity infusion enabling further expansion.

Overland Park, Kansas-based Prime Capital Investment Advisors secured a minority investment from Abry Partners, which previously took stakes in RIA platform Dynasty Financial Partners and consolidator Beacon Pointe Advisors, the firms said on July 12. Since 2017, Prime Capital has gone from $2.7 billion in client assets to $25 billion managed by 160 financial advisors, including 120 that have stakes in the firm, according to CEO Glenn Spencer. In that span, the company made 19 acquisitions and bulked up its valuation by a factor of 21, he said.

With private equity a driving force behind the industry's continuing flow of M&A deals and higher levels of debt in their portfolios than in publicly traded firms' capital structures, experts say that finding the right fit in an investor is crucial for RIAs and other wealth management firms. 

In Prime Capital's case, the firm was seeking a partner that could help it complete more deals and maintain annual growth rates of 11% organic expansion and 25% to 30% overall, Spencer said. The parties didn't disclose the terms of the minority transaction in Prime Capital, which has received backing in the past from an individual investor and another private firm called LNC Partners. The deal is expected to close Aug. 1.

"We knew we would be really attractive. The goal of the recapitalization was to replace that individual with a growth capital strategic partner," Spencer said in an interview. "It worked out for everyone in a very difficult market."

Practice and client management

10 tips from expert dealmakers on navigating RIA M&A

June 26, 2023 3:48 PM

Some in the industry carry misconceptions about private equity investments, according to John Wernz, who joined PE firm Great Hill Partners last month as its executive in residence after spending 13 years at Wealth Enhancement Group as it expanded from $2 billion to $50 billion in client assets. The notion that private equity investors care only about M&A over organic growth and are willing to risk upsetting a firm's culture to "just Band-Aid a bunch of stuff together for a short-term gain" over three to seven years is just wrong, Wernz said.

"The good ones don't think like that. The good ones care about building a company that will last," Wernz said. "Private equity can absolutely be a culture accelerator, not a culture destroyer."

In addition to picking up the equity in Prime Capital and providing additional capital for acquisitions and other investments in the business, Abry will receive representation on the Prime Capital board under the deal. Since 1989, the firm has completed more than 550 transactions in media, communications, business and information services, among other industries, according to Abry's website.

"We are firmly committed to the financial advisory space and view PCIA as one of the long-term winners in this sector," Abry partner James Scola said in a statement. "Together, we will continue to innovate and attract the most talented people in the industry, creating tremendous value for all of our stakeholders."

Industry News

Why dealmakers are still making waves in the M&A slowdown

July 11, 2023 2:52 PM

Private equity firms' minority investments into wealth management companies are rising "as RIAs seek capital injections to support their inorganic growth strategies," according to the second-quarter M&A report from investment bank and consulting firm Echelon Partners. 

Examples of agreements from the second quarter include Leonard Green & Partners' investment into Hub International, Altas Partners' infusion into Mercer Advisors and a group of investors including Bain Capital and the Abu Dhabi Investment Authority's purchase of a 20% stake in the U.S. wealth management business of CI Financial.

"In many cases, these minority transactions represent the second, third or fourth time these firms have added additional financial sponsors," according to Echelon's report.