Focus Financial Partners looks to double revenue by 2025: Adolf

Focus Financial Partners Inc. hit a new high in registered investment adviser transactions — 38 — last year and it expects that momentum to continue in the next few years, with a target of more than doubling its annual revenues by 2025 to reach $4 billion.

Last year's pace of mergers and acquisitions, which Focus Financial Partners breaks into two categories of “partner firms” and “mergers,” bested the firm's previous high of 34 deals in 2019. In 2017, 2018 and 2020, Focus Financial completed 25 such deals.

The firm finished the year with a bang, closing 22 deals in the fourth quarter alone, it reported Thursday in its earnings report for the fourth quarter.

"The reality is yes, last year was simply an extraordinary year from an M&A performance," Rudy Adolf, the firm's CEO and founder, said Thursday during a conference call with analysts to discuss the fourth-quarter earnings. "We deployed more capital than ever before."

RIA merger and acquisition activity across the industry soared in 2021, setting a new record for the eighth consecutive year, according to DeVoe & Co. The 242 transactions that occurred last year marked a sharp increase from previous years and a 52% spike from the 159 transactions in 2020.

Focus Financial Partners was active in that marketplace.

"What made 2021 a standout year was the acceleration of our M&A momentum, as we capitalized on the industry consolidation opportunity in a disciplined way," Adolf said, adding that 14 of the transactions Focus Financial closed last year involved partner firms and 24 were mergers.

On the back of this heated market, Focus Financial Partners is looking to more than double its revenue by 2025, to $4 billion, Adolf noted. The company reported $1.8 billion in revenue last year. Focus Financial currently has 84 partner RIA firms and wants that to reach about 125 firms over the same period.

"To reach these targets in about four years’ time requires that we more than double the size of our revenues and adjusted [earnings before interest, taxes, depreciation and amortization], while increasing the number of partner firms we have by about 50%," Adolf said. "We believe that these targets are aggressive, but achievable."

Focus Financial Partners was launched in 2004 and has been in the vanguard of the RIA aggregator market ever since.

Over the past 15 years, the RIA aggregator market has exploded, in large part the result of a flood of money from Wall Street, typically via private equity investors.