Is the Carson Group worth $1 billion?

Ron Carson

Just five years ago, the Carson Group had a total valuation of $120 million, or six to eight times less than its current potential valuation. The firm said in October it is looking to raise capital to continue to invest in registered investment advisers and wealth management firms.

With potential minority investors kicking the tires, the Carson Group, with $17.3 billion in assets and its own homegrown technology, is being valued from $685 million to as much as $1 billion, according to two well-placed industry sources.

Carson Group said in October it was looking to raise capital to continue to invest in registered investment advisers and wealth management firms. According to those sources, Carson Group would be selling a minority stake to an investor, potentially in the range of 30% to 40% and perhaps a large institution, with the firm maintaining a controlling interest.

One investment banking source said the Carson Group’s baseline valuation was $750 million. Another source said bids for the minority stake have been based on a total firm valuation of $685 million to $1 billion.

Both sources declined to comment publicly because of the private nature of any transaction.

The value of the Carson Group enterprise has ballooned in the past five to six years, coinciding with the influx of private equity managers investing heavily in the RIA industry.

Long Ridge Equity Partners in 2016 bought a 29% equity stake in Carson Group for $35 million, which translated into a total firm valuation of $120 million, or six to eight times less than the firm’s current potential valuation. At the time, Carson Group had about $6 billion in assets, or close to one-third the amount now.

It’s not clear what would happen to Long Ridge’s stake in Carson Group with a new minority investor.

A spokesperson for Carson Group declined to comment.

Launched by Ron Carson in 1983, Carson Group has evolved from a leading branch office at LPL Financial to one of the largest RIAs in the country, with more than 300 financial advisers operating in 36 states and servicing more than 36,000 households, according to its website.

CEO and founder Ron Carson is one of the more colorful figures in the often-stodgy wealth management business; at one event in October 2012 to coach financial advisers, he walked onstage through a fog from dry ice dressed in leather jacket and shades, a la the character Marty McFly from the movie “Back to the Future.” Earlier that year, he told a reporter from InvestmentNews that he and his team weren’t a bunch of “Muppets” to be pushed around in negotiations with storied investment bank Goldman Sachs.

Carson Group has built much of its own technology, which potentially sweetens the firm’s worth in the current madcap craze for RIA mergers and acquisitions. And at least one past deals shows that a $1 billion valuation for a firm is not out of the realm of possibility; two years ago, Goldman Sachs said it was paying $750 million for United Capital, a large network and buyer of RIAs which had $25 billion in client assets at the time.

Since then, the marketplace for RIA mergers and acquisitions has only intensified, driving up valuations for all types of wealth management businesses that charge clients an annual fee for financial advice.