Lightyear sells Wealth Enhancement Group to TA Associates

Don Marron and the $11.8 billion RIA ride the wave of private-equity ownership

Jul 31, 2019 @ 2:00 pm

By Jeff Benjamin

Minneapolis-based Wealth Enhancement Group has extended its relationship with private-equity investors through a deal that will transfer a majority ownership stake in the $11.8 billion advisory firm to TA Associates.

The deal, announced Wednesday, transitions the majority ownership stake from Lightyear Capital, which has been a majority owner of the registered investment adviser since 2015. Lightyear's founder and chairman is Donald Marron, a veteran brokerage executive who ran PaineWebber before it was purchased by UBS in 2000.

Wealth Enhancement Group, which has made 13 acquisitions over the past six years and claims $1 billion worth of organic growth over each of the past two years, has been partially owned by outside investors since 2003.

"This transaction is a natural and expected part of the growth process for a firm like Wealth Enhancement Group," said David DeVoe, managing director at DeVoe & Co., which tracks RIA industry consolidation.

"TA Associates is a well-respected private-equity firm, which has experience in the financial services space," Mr. DeVoe said. "Transactions like this will not only help firms like WEG accelerate their growth, but also contribute to the RIA industry overall. Investments like this help drive innovation in and the expansion of the fiduciary approach to wealth management, ultimately benefiting the U.S. investing public."

Daniel Seivert, chief executive of investment bank Echelon Partners, said private-equity ownership of RIAs is a growing reality, and with that reality comes ownership turnover.

"All PE firms are constantly evaluating the time and growth associated with each portfolio company to determine the [internal rate of return] they report to their limited partners," he said, adding that PE investors typically hold for at least seven years unless they don't like the prospects for investment returns.

Another reason for such sales between PE firms, Mr. Seivert said, could be portfolio rebalancing by Lightyear, which also owns a big piece of Cerity Partners, a $21 billion RIA.

According to a statement from Wealth Enhancement Group chief executive Jeff Dekko, the partnership with TA Associates could bring about a new level of growth for the RIA.

"Having been well-acquainted with TA Associates for over half a decade, we are entering this new partnership with a sense of familiarity combined with excitement about our future, as they have been an attractive partner to support the next phase of our growth," he said. "TA Associates stands out in terms of its global scale, its significant expertise in the financial services sector, its embrace of our long-term growth vision, and its strong alignment with our company's core values and culture."

TA Associates did not respond to a request for comment for this story, but according to the press release, the PE firm believes "Wealth Enhancement Group is very well-positioned to continue to drive the trend toward making objective, independent financial advice more broadly available to mass affluent and affluent investors across the country."

TA Associates concentrates its private-equity investments in five industries: technology, healthcare, financial services, consumer and business services. Since its founding in 1968, TA has raised $32.5 billion worth of investment capital and invested in more than 500 companies.

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