Focus Financial sees another bang-up year for RIA M&A in 2021

Focus Financial Partners Inc.'s founder and CEO Rudy Adolf sees no slowdown in the blistering marketplace for mergers and acquisitions among registered investment advisers in 2021.

"Our pipeline is excellent," said Adolf during a conference call Thursday morning with analysts to discuss company earnings. "Quite frankly, in many ways, we are busier than ever. Last year, we did 25 deals, and by the way, the prior year was our record with 34 deals."

He said that Focus Financial is doing a variety of different types of transactions. Those range from deals and acquisitions at the level of the holding company, which targets RIAs typically with $1 billion in client assets, and transactions done by RIAs working on the Focus Financial platform, which Adolf dubbed as partner firms.

Focus Financial is one of the leading RIA aggregators in the marketplace and reported $250 billion in client assets. Adolf said the most recent AUM number the firm had released was $200 billion.

There is no doubt as to the growing number of entities, including a surge of private equity money, feeding the demand for RIAs. Indeed, the appetite for RIAs bounced back from a slowdown last March to finish the year with a record 205 deals, according to a recent report from Echelon Partners, an investment bank.

That’s up slightly from 203 deals in 2019 and continues a steady upward trend from 60 acquisitions in 2012, according to Echelon.

Adolf said that Focus Financial was staying away from any bidding wars for RIAs that were seeking as much as two to three times the norm of historic valuation when considering a buyer. He added that, internally at Focus Financial in 2020, such deal making was likened to the spending of "drunken sailors."

"We would never do that to our shareholders," he said.

Focus Financial is also keeping its eye on expanding overseas, particularly as its one of its recently rebranded RIAs, Connectus Wealth Advisers, announced three Australian wealth management acquisitions at the end of 2020.

In 2020, Focus Financial reported total revenues of $1.36 billion, up 11.7% compared to the previous year. The firm also reported net income of close to $49 million in 2020 compared to a loss of $12 million a year earlier.

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