Baldwin Brothers, a $1.2 billion Marion, Massachusetts-based advisory firm, has taken the plunge into the world of private equity partnerships by selling a minority stake to Merchant Investment Management.
John Mannix, chief executive and part of the second-generation ownership team at Baldwin Brothers, said the proceeds of the sale will be used to help fund the succession continuity plan for the founding partners who launched to business in 1974.
Some of the money will also be used to finance inorganic growth, including acquiring other registered investment advisers, Mannix added.
“I’ve known the players at Merchant for several years,” he said. “We evaluated all of our options over the past few years, and we sought a collaborative, noncontrolling minority partner.”
Unlike most private equity investors that hold ownership stakes inside a fund, Merchant is structured as an operating company and so far has only acquired noncontrolling ownership positions of up to 20%.
Baldwin Brothers represents the 21st minority position for Merchant since it started buying into the space three years ago.
While most PE investors tend to roll over positions within four to seven years, Merchant markets itself as a provider of “permanent, durable capital,” according to managing partner Tim Bello.
“It’s a yield growth play,” he said. “These [RIAs] want to be and can be viewed as growth stocks, and we can help with that.”
While Bello said he “would never say never” regarding the opportunity to buy more than a minority position in an RIA, he said the minority ownership model works for Merchant.
In terms of how long the PE investor will stay invested, Bello said, “We have no preset templates that say how long we will hold these positions; there’s no time clock to it.”
Plus, a $400 million Commonwealth team departs to launch an independent family-run RIA in the East Bay area.
The collaboration will focus initially on strategies within collective investment trusts in DC plans, with plans to expand to other retirement-focused private investment solutions.
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