Private equity firm Thomas H. Lee Partners buys stake in HighTower

The private equity firm will buy out existing institutional investors and invest an additional $100 million in the RIA

Oct 25, 2017 @ 12:10 pm

By Jeff Benjamin

This story has been updated with comments from industry consultants and additional quotes from Elliot Weissbluth.

HighTower has announced plans to sell a "significant stake" of its sprawling advisory business to private-equity investor Thomas H. Lee Partners, laying to rest rumors of a near-term public stock offering or sale.

The recapitalization agreement, announced Wednesday morning, will involve some institutional investors selling their interest in HighTower, but the new private equity investors have also committed to an additional $100 million of new equity capital.

"They are bringing a terrific bench of seasoned professionals, and they are tremendously well-capitalized," said HighTower chief executive Elliott Weissbluth, who also acknowledged that the pirvate-equity infusion confirms no immediate plans for an IPO.

"Thomas Lee is a great partner for us because of their sophistication and deep capacity to capitalize our next stage of growth," he said. "Talk to me down the road about an IPO."

So far this year, HighTower has completed 13 RIA transactions and onboarded 22 teams, Mr. Weissbluth said.

Total client assets are at $50 billion, up 27% from the start of the year.

David DeVoe, managing partner at RIA consulting firm DeVoe & Co., said there are "many positives" to partnering with P-E investors and that it should lead to accelerated growth by HighTower.

"On a macro level, private equity investors include some of the smartest brains in the industry, and they are voting with their checkbooks on the RIA model," he said. "They are savvy individuals with a good understanding of what's happening in the marketplace, and they can bring a lot of value to an organization like HighTower."

Daniel Seivert, chief executive of the investment bank Echelon Partners, called the P-E partnership "an important milestone in HighTower's development."

"With some industry observers questioning the firm's business model and forward progress, HighTower will enjoy a positive boost from the positive vote it receives from TH Lee through this investment," he added.

Regarding some persistent, if unsubstantiated rumors, regarding an imminent sale of HighTower, Mr. Weissbluth said he is focused on leveraging his new partners for "significant growth."

"For 10 years, HighTower has set a new standard for investors, delivering sophisticated financial advice without the conflicts of the conventional financial services firms," he said. "TH Lee fully supports our mission of delivering objectivity, transparency and independent thinking to investors, while always putting their best interests first. Our partnership will help us reach more advisers and clients who refuse to settle for the industry's status quo."

Mr. DeVoe sniffed at the idea that HighTower was for sale, and instead believes it will continue its trajectory of growth through consolidation.

"They have become a major player in this space, and this private-equity deal will enable them to accelerate their success," he said. "They're one of the biggest players in the space, and that's part of their value proposition, because size matters."

Mr. Weissbluth refused to say specifically how the money the P-E firm is investing in HighTower will be used, or other terms of the agreement.

Thomas H. Lee Partners did not immediately respond to a request for comment.

The transaction is subject to customary regulatory approvals and closing conditions, and is expected to close by March 2018.

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