Strong M&A market for RIAs propels Focus Financial toward possible IPO

Registered investment advisory firms have been merging at swift pace after record-setting 2015

Aug 24, 2016 @ 1:16 pm

By Christine Idzelis

Focus Financial Partners has the wind at its back in the merger and acquisition market as the aggregator of registered investment advisory firms reportedly prepares to go public.

The firm has confidentially filed for an initial public offering that could value it at $1 billion, the Wall Street Journal reported Sunday, citing people familiar with the matter. Daijing Lin, a spokeswoman for Focus Financial, declined to comment.

RIA mergers continued at a “swift pace” in the first half of this year after a record-breaking 2015, boosted in part by so-called sub-acquisitions, or smaller deals done by firms that have been purchased, according to research and consulting firm DeVoe & Co.

GYL Financial Synergies, a West Hartford, Conn.-based RIA firm with $4.5 billion of assets that this month joined Focus, is planning to use the firm's financial resources to expand, in part through acquisitions.

“I expect M&A will accelerate, which should be very beneficial,” said David DeVoe, founder of DeVoe & Co.

Focus profits from the cash flow produced by financial advisers that are in its network, and stands to benefit as assets tied to those earnings streams swell through mergers, according to Ron Edde, president and CEO of recruitment firm Millennium Career Advisors.

“They've never been one to take on small teams,” he said, adding that Focus isn't likely to consider taking on groups with less than $400 million of assets, though acquisitions done by RIAs that join its partnership, known as tuck-ins, may be smaller.

New York-based Focus helped the advisers that founded GYL Financial Synergies leave Wells Fargo & Co.'s independent brokerage arm.

“The access to resources and capital we will have as a part of the Focus partnership will enable us to grow our new firm, both organically and through M&A transactions,” Gerald Goldberg, GYL's chief executive officer, said in an Aug. 1 statement about the move.

In its mid-2016 M&A report, DeVoe & Co. pointed to Buckingham Asset Management, an RIA firm in St. Louis, Mo., that joined Focus in 2007, as being particularly active in sub-acquisitions. With the support of Focus, Buckingham has done deals with 22 firms or teams, including three representing $700 million of assets under management in the first half of this year.

Focus, which was founded in 2006, produces almost $400 million in annual revenues, according to a company statement on Aug. 17. Companies with less than $1 billion of revenue can file confidentially for IPOs on U.S. exchanges, the WSJ reported in its story on the firm's plans to go public.

Focus has been “dominant” among aggregators in the RIA market, including such firms as United Capital, HighTower Advisors and Fiduciary Network, Mr. DeVoe said.

Focus is seen competing for large deals with at least $1 billion of assets, he said, a segment of the market that's been particularly active. Mergers involving RIA firms overseeing $1 billion to $5 billion of assets spiked in the first half of this year, according to DeVoe & Co.


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