Focus Financial adds to 'hefty' acquisition war chest

After doing 10 deals in 2013, Adolf expects 2014 to be 'a very good year'

Jan 7, 2014 @ 10:59 am

By Trevor Hunnicutt

Focus Financial Partners, one of the largest buyers of financial advisers' businesses, is getting deeper pockets in the New Year.

The partnership last month gained access to up to $550 million in credit from 10 financiers, led by Bank of America Corp., Focus chief executive Ruediger "Rudy" Adolf said in an interview Tuesday.

The loan facility allows Focus' 27 partner-advisers to open up their wallets and finance a host of acquisitions in the coming months and might spur an increasingly active mergers-and-acquisitions market this year for the businesses of registered investment advisers.

"We are very optimistic about the coming years because we believe 2014 will be, again, a very good year," Mr. Adolf said.

"We believe, ultimately, we can deploy this capital over time, and we have a very strong pipeline," he said, referring to a landscape of potential acquisitions.

“This gives them a huge war chest,” said M&A consultant David DeVoe.

“Having a large credit facility is a great asset for an organization," he said. "It's critically important that the management team be intelligent in how they implement it."

Mr. DeVoe, whose firm, DeVoe & Co., hasn't worked with Focus, said that the management team at Focus has "demonstrated a steady hand on the wheel."

Focus provides financing for its partners to acquire firms, largely in deals that combine cash payouts to advisers with an equity stake in the firm. It also purchases firms itself and finances internal succession plans.

Last year, the firm and its partners closed 10 transactions and increased Focus' assets under management by about $10 billion, to $70 billion. Eight of 10 of those deals were financed by Focus for its partners.

The new loan facility is nearly double the firm's last, which was negotiated in 2012, and adds leverage to the millions generated each month by business operations. Other investors in this funding include Bank of Tokyo Mitsubishi-UFJ, Comerica Inc., Fifth Third Bank, Huntington Bank, J.P. Morgan Chase & Co., SunTrust Robinson Humphrey Inc., TriState Capital Bank and U.S. Bank.

In July, Focus also said that it took in a $216 million investment from private-equity firm Centerbridge Partners.

Focus competes with other active firms in luring promising advisers and so-called breakaway brokers, including HighTower Advisors and United Capital Financial Advisers. United Capital chief executive Joseph J. Duran said that the firm doesn't do debt-financed transactions and hasn't spent any of a $38 million private-equity infusion that it announced October.

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