Pathstone tops $100 billion with latest acquisition

Private equity-backed Pathstone continues its rapid pace of growth with the announcement that it is acquiring $17 billion multifamily office firm Veritable from Affiliated Managers Group.

The deal, which is expected to close near the end of the third quarter, will push Pathstone’s total assets to over $100 billion, making it one of the largest family offices for ultra-high-net-worth clients in the country.

This marks the third acquisition of the year for Englewood, New Jersey-based Pathstone, which was launched in 2010 when the original eight shareholders spun off from myCFO with $1.4 billion in client assets.

Pathstone, which will add its 19^th office when Philadelphia-based Veritable is completely on board, is majority-owned by private equity investors and is on its third round of private equity partnerships.

Matthew Fleissig, Pathstone co-founder and chief executive, said the firm has made 13 acquisitions in 13 years, including four last year, and that the growth has been split evenly between organic and inorganic.

“We had the gas, engine and brakes, but private equity has been the fuel to get us to the next level,” he said. “Private equity has been one of the best things to happen to our business.”

Pathstone was at $4 billion when it entered into its first PE partnership in 2015, Fleissig said. “We will continue to look to expand horizontally and vertically.”

The combination with Veritable will bring together two advisory firms uniquely focused on the wealthiest level of individuals and families.

Veritable has 87 employees and more than 200 clients that average $75 million in assets. They will join 383 employees at Pathstone, where the 500 clients average $140 million under advisement or administration.

Fleissig declined to comment on the details of the transaction beyond, “We bought out AMG for cash, and the shareholders at Veritable rolled into Pathstone.”

Once the two firms are officially combined, Pathstone will add 34 new shareholders from Veritable, bringing the Pathstone total to 215 shareholders.

“Veritable’s mission has always been to be the most trusted financial advisor in its clients’ lives and to cultivate an environment that embraces innovation,” Michael Stolper, co-CEO and founder of Veritable, said in a statement.

“We are culturally and philosophically aligned with Pathstone, and this combination will allow us to further deliver on our mission and execute on the generational promise we’ve made to our clients,” Stolper added. “While we are proud of what we have built as Veritable, we look forward to this next chapter being one of continued growth, collaboration, and delivering a truly differentiated solution in the independent RIA space.” 

As mega RIAs continue to swell in size, the speculation over when the mega firms will start buying each other has been ramping up. Pathstone is clearly at that level but so far has stuck to its niche of being a family office firm for the ultra-wealthy.

One thing is certain, if Pathstone is looking for sellers, it will have plenty of options to choose from.

While RIA consolidation pulled back slightly in the second quarter, analysts remain bullish on the pace of mergers and acquisitions for as far out as anyone can see. Whether driven by the need for scale, succession planning or some other reason, the deal pipeline is flowing.

“There’s starting to be more recognition among business owners that there will be some continued consolidation, and the benefits are obvious at this point,” Jim Cahn, chief investment officer and chief business development officer at Wealth Enhancement Group, said earlier this month when commenting on the M&A activity so far this year.

“The next wave of consolidation is really about who will have that technology to provide scale,” Cahn said.

The latest data from Echelon Partners showed 65 transactions during the three-month period ending June 30, which compares to 75 deals during the prior quarter and 91 deals during the same quarter last year.

While deal activity has seen a gradual decline since peaking at 99 in the fourth quarter of 2021, Echelon reports that the recent quarter stood out as the second-most-active second quarter on record.