HighTower Advisors, a hybrid advisory firm whose trajectory has been closely followed as a barometer for success of the independent model, made a presentation last week on taking the firm public, according to sources who requested anonymity because they did not have permission to speak publicly.
Advisers at HighTower's roughly 50 partner firms who have equity in the company were briefed on the plans at a confidential meeting in advance of HighTower's annual conference in Chicago, a source present at the meeting said. Almost all of the partners approved of an initial public offering, and those who hesitated did so only because they wanted more clarity, the source said.
The firm's recruiting growth and earnings are on track to make an
IPO a possibility as early as the latter part of 2016, according to the source. It would depend on a number of factors, including the condition of financial markets next year, whether HighTower can maintain its growth and, most importantly, sources said, when the firm's private-equity investors thought the timing was appropriate.
HighTower does not disclose earnings, but executives have said it has around $30 billion in assets under management and around $200 million or more in revenue. The firm has around $165 million in private investor backing and has received about $150 million in credit lines from various banks.
In an interview with
InvestmentNews last week at the HighTower's annual conference, its chief executive Elliot Weissbluth offered a more conservative outlook. He said that a decision would likely be made over the next two years whether to go public or find other private capital to replace the firm's original investors. He described an IPO as a “realistic option” now given the firm's financial standing, but said that an investment banker had not been hired and the firm had not ruled out going to other private-equity sources.
“The reality for any business that takes in
private equity is that you have to give the capital back,” Mr. Weissbluth said. “I'm a little amused by everybody's fascination with this topic because to me it's just going from one kind of capital to another.”
Mr. Weissbluth said that possible negatives of going public include additional compliance costs and regulatory requirements. But going public would give the firm the benefit of more flexible capital and brand recognition, he said.
A couple of independent advisers have already tested the public markets, but the markets have not always been welcoming. The Edelman Financial Group Inc., for example, went public in late 2010 only to be taken private less than two years later.
“No one really understood the company, and therefore the stock price did not accurately reflect the value of the firm,” the firm's founder, Ric Edelman, recalled in an interview. “I'm not convinced, with the benefit of hindsight, that some of the companies who currently go public will like their decision.”
Silvercrest Asset Management Group Inc., a large fee-only registered investment adviser and asset manager with $18.2 billion in assets under management and $70 million in annual revenue, went public in 2013 at $12 per share. Its stock (SAMG), is relatively thinly traded and was priced at around $13.13 on Tuesday, giving the company a valuation of just over $163 million.
Its chief executive, Richard R. Hough III, said that the company decided to go public in order to provide an exit for the private-equity investors and liquidity for the partners. The decision was “perhaps a bit harder than we expected,” he said. Still, the firm has grown substantially since the IPO, he said.
David DeVoe, founder of DeVoe & Co., a firm that values RIA businesses, said that firms generally need a valuation of at least $300 million to go public. He noted that HighTower could have a compelling story to tell investors as a way for Main Street investors to buy into a “non-Wall Street” investment company.
“I hope that the public markets welcome it and sustain the positive view,” Mr. Edelman said. “That would be good news for our industry.”
