Focus Financial notches two more acquisitions, bringing 2021 total to 15

Focus Financial Partners is rolling into the July 4^th weekend with two more acquisitions under its belt, bringing its total deal count in 2021 to 15.

On Friday, the $250 billion RIA aggregator announced the acquisition of Sonora Investment Management, a $1.3 billion Tucson, Arizona-based advisory firm. Separately, Focus Financial announced the acquisition of Bethesda, Maryland-based Collins Investment Group by Focus partner firm XML Financial Group, a $1.3 billion firm based in Rockville, Maryland.

These are the first acquisition announcements from Focus since the report two weeks ago of how the mega-aggregator is evolving toward the next stage of its growth.

One of Focus’ original private equity backers, Kohlberg Kravis Roberts & Co., recently sold its 6% ownership through a secondary stock offering after earning a 65% gain from Focus’ 2018 initial public stock offering.

Focus is still 14% owned by private equity firm Stone Point Capital. But the migration by PE investors, combined with Focus’ $800 million debt issuance to fund acquisitions, offers a kind of blueprint for RIA aggregators as consolidation continues.

According to the latest report from DeVoe & Co., consolidation in the RIA space is on pace to shatter previous records, with 100 deals already announced this year.

For perspective, in each of the past two years, it took until September to reach the 100-deal mark, and in 2018, the 100-deal mark wasn’t reached until December.

David DeVoe, founder and chief executive, said the industry is on track for its eighth successive record year for acquisitions.

“High valuations, a newfound focus on solving succession and concerns about looming tax increases are driving heightened explorations of external sales,” he said.

In terms of Focus’ latest deals, the story continues to be about the benefits of scale.

"Finding a strategic partner that could position us for accelerated growth, while at the same time help ensure the continuity of our business over the long term, was very important to us," said Graham Gaines, partner at Sonora.

"We chose Focus because they truly understand the importance of maintaining our entrepreneurial independence," added Brad Toland, co-founder and partner at Sonora. "We also deeply value their M&A expertise and long track record of helping their partner firms enhance their organic growth. We are excited to embark on this next chapter of our evolution in partnership with Focus."

The sub-acquisition involving Collins Investment Group and XML Financial Group will enable “the CIG team to leverage XML’s operational resources to support continued growth,” according to the press release.

“This transaction not only expands XML's presence in the high-net-worth market in their local area, but also brings together two highly complementary businesses," Rudy Adolf, chairman and CEO at Focus, said in the press release. "It also further reinforces the value of Focus' scale, network, and highly differentiated M&A expertise to our partners. The business expansion our partner firms achieve via mergers is a powerful catalyst to the overall growth of our partnership."