Focus Financial Partners is adding another $800-million worth of debt financing to help beef up its acquisition efforts across the wealth management space.
On the heels of 25 acquisitions last year and 10 so far this year, the thinking is that the $1.6 billion worth of debt capital already on the books won’t be enough for Focus’ hungry appetite for registered investment advisers.
“You can conclude from this morning’s announcement that the pace of our deal activity will accelerate into the second half,” said company spokesperson Tina Madon.
“The major point is we have a record pipeline,” she added. “We’re raising this $800 million in advance of our expectation that we will close these transactions, which we anticipate will close over the next few quarters.”
Focus Financial is one of the few publicly-traded companies in the RIA aggregation space and is tapping into a loan syndicate of multiple banks that will make the money available.
The final interest rate on the new loan will be announced in a follow-up press release, said Madon, who added that Focus’ weighted average cost of existing debt capital is 2.4%.
From a balance-sheet management perspective, the new debt matures in 2028, which compares to Focus’ existing $1.6 billion of debt that matures in 2024.
Considering the current record-level pace of consolidation in the RIA space, debt financing is a prudent way to stay in the game, according to Denise Valentine, research director at Chartis.
“Leverage provides balance sheet flexibility, and as good financial advisers, Focus knows using other people’s money is an effective growth strategy,” she said.
Valentine also cited recent remarks from the Federal Reserve suggesting higher interest rates on the horizon as another reason why “locking in now makes sense.”
Daniel Seivert, chief executive of Echelon Partners, also supports debt financing over the costlier option of equity financing.
“We do anticipate that 2021 will be a record year with deal volume, topping 200 transactions,” he said. “In addition, we believe it is possible to anticipate capital needs by reviewing one’s deal pipeline which often provides a view of capital needs six-to-nine months down the road. We think this is a smart move for Focus and a harbinger of the deal volume to come for other acquirers as well.”
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.
It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.
Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
