After months of speculation, Fisher Investments said over the weekend it had sold up to 23.5% of the $275 billion registered investment advisor to a group of investors, and, after doing some quick math, market players and participants placed a valuation of the firm in neighborhood of 15.5 time EBITDA, or earnings before interest, taxes, depreciation and amortization.
EBITDA is an all-important cash flow metric that RIAs like Fisher Investments and buyers, including private equity funds, use to determine the price of an RIA acquisition. Fisher Investments on Sunday afternoon said that Advent International and a subsidiary of the Abu Dhabi Investment Authority agreed to make a minority investment the firm, controlled by noted investor and marketer Ken Fisher.
According to Fisher Investments, the deal to buy the minority stake in Fisher Investments values the firm at $12.75 billion. A rough valuation metric for a firm the size of Fisher Investments would work like this: 30 basis points on $275 billion of assets equals annual EBITDA, or $825 million. Multiply that by 15.5, and get the amount of $12.8 billion.
Paying 14 to 15 times EBITDA for an RIA firm the size and overall quality of Fisher Investments is in the realm of what the market is currently commanding, said senior market sources who spoke confidentially to InvestmentNews about the deal.
Those sources noted that price tag may be a bit high for a minority position in an RIA, but it was generally the going market rate for a large, well-managed advisory firm.
In the more than decade long boom times for RIA and broker-dealer mergers and acquisitions, valuations have soared, rising 50% - or more - for large RIA firms like Fisher Investments. Private equity managers and other buyers have been particularly eager to get their hands on businesses like RIAs that have strong, steady, cash flows, with RIAs average annual rates of EBITDA of 25% to 35% of revenues.
"This is the first outside investment in Fisher Investments, or FI, with previous FI ownership solely among family and employees," the company said in a statement. "After the transaction closes, Ken Fisher will retain a majority of beneficial ownership and of voting shares exceeding 70%. There is no further FI investment transaction contemplated."
Ken Fisher launched his eponymous firm in 1979 and marketed directly to mass affluent investors, meaning clients with a minimum of $500,000 to invest. It has 150,000 clients globally.
"There's not that many firms of this size that is a private company RIA selling in the market," said Carolyn Armitage, an industry consultant. "So, this is fairly new, unchartered territory for the industry."
"The firm is unique because of its retail brand," said Mark Tibergien, who retired as CEO of Pershing Advisor Solutions in 2020 and is now a management consultant.. "And it's been one of the only RIAs to advertise, which emphasizes Fisher Investments, not Ken Fisher. It's like Merrill Lynch. It was named after its founder, Charles Merrill, but that has become the institutional brand."
In October 2019, Fisher was charged by some with violating the limits of good taste and decorum when he made a series of offensive remarks during a presentation at an industry event. He compared the process of gaining a client’s trust to “trying to get into a girl’s pants” and talked about genitalia.
Fisher apologized after the comments were made public on social media in a video posted by a financial advisor who attended the meeting.
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