Edelman goes public on taking firm private

In a dramatic turn, Edelman Financial announced on Monday that the publicly traded company will be acquired by a PE firm in a deal valued at $265 million. Why delist? Ric Edelman explains it all for you.

The Edelman Financial Group Inc. is going private.
The nationwide wealth manager, founded by financial planning industry icon Ric Edelman, announced Monday that it will be acquired by the private-equity firm 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,” which 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. So this is an excellent liquidity event.”
The deal is expected to close in the third quarter, subject to approval by shareholders.
Edelman Financial manages about $17 billion in client assets through 43 offices in the U.S.
Employees and clients of the company will see no changes, Mr. Edelman said, adding that he will maintain executive control over the business. George Ball, co-chief executive of Edelman Financial, will become chairman 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 in 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,” Thomas H. Lee, president of Lee Equity Partners, said 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 & Co. Inc. last year, before the brokerage business was sold to Raymond James Financial Inc.
After MF Global Holdings Ltd. 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.
(Mark Bruno contributed to this story)