The Edelman Financial Group Inc. is going private.
The nationwide wealth manager, founded by
financial planning industry icon Ric Edelman, announced today that it will be acquired by the
private equity firm of Lee Equity Partners LLC.
Lee will pay $8.85 per share in cash, a premium of 43% over Edelman Financial's Ticker:(EF) Friday closing price of $6.18. That puts the deal price at around $265 million.
"Companies of our size really have no business being public, especially in the financial sector" that is dominated by big firms, Mr. Edelman said in an interview.
The company's market capitalization was too small to get the attention of analysts and build liquidity, he said. "It's been very difficult for shareholders to liquidate their shares without punishing the stock," he said. "So this is an excellent liquidity event."
The deal is expected to close in the third quarter, subject to approval by shareholders.
The Edelman Financial Group manages about $17 billion in client assets through 43 offices in the U.S. Employees and clients of Edelman, which manages about $17 billion in assets through 43 offices in U.S., will see no changes, he said. "We've agreed for me to maintain executive control over the business," he said. George Ball, co-chief executive of Edelman Financial, will become chairman of the company after the transaction closes, Mr. Edelman said.
In 2005, Mr. Edelman sold his firm to Sanders Morris Harris Group Inc., a publicly traded holding company co-founded by Mr. Ball. Later, Sanders Morris changed its name to The Edelman Financial Group.
Last year, Mr. Edelman -- one of the biggest names in the
financial planning industry -- announced that he was
exiting the independent-contractor brokerage business, saying the channel faces steep hurdles that limit profitability.
"Everyone will draw their own conclusions, but I consider the independent-broker-dealer channel severely flawed and question the sustainability of many of the players in the space,” Mr. Edelman said in an
interview in October. “The economics are very challenging in today's environment.”
Mr. Edelman added that he was exiting the indie B-D space -- a move that affected about 15 practices with roughly 75 reps across his firm -- to focus on the wealth management business. Mr. Edelman is the largest shareholder of his firm.
"The Edelman Financial Group has achieved a strong track record and is a clear leader in the independent financial adviser field," said Thomas H. Lee, president of Lee Equity Partners, in a statement today. "We are excited to partner with Edelman Financial's management team, and we look forward to supporting the company's continued expansion."
The PE firm has been down this path before. Last year, the firm was one of a handful of private equity outfits
reportedly interested in acquiring Morgan Keegan last year, before the brokerage business was sold to
Raymond James.
After MF Global declared bankruptcy at the end of October, the PE firm reportedly lowered its bid for Morgan Keegan to $750 million, according to anonymous sources who spoke to Bloomberg News.
Mr. Lee is a "pillar" in the private equity space, Mr. Edelman said. He added that Lee's "seal of approval" should help Edelman Financial continue to grow.
