Private equity firm Thomas H. Lee Partners announced Thursday it is increasing its funding in Hightower and bringing new investors on board, an endorsement of the large registered investment adviser’s strategy to acquire other RIAs.
The secondary transaction follows THL’s first investment in Hightower in 2018. A spokeswoman for Hightower declined to reveal the terms of Thursday’s deal. It will not result in changes to the governance of the company or to its executive leadership team.
In addition to putting more money into Hightower, THL established a new investment vehicle that includes investments from funds advised by Goldman Sachs Asset Management, Neuberger Berman and Coller Capital. THL remains the lead investor.
“Hightower’s innovation and leadership have changed the way advisors and clients view the financial advice industry, and we are delighted to have led a syndicate of investors who believe strongly in Hightower’s business strategy,” THL managing director Ganesh Rao said in a statement.
“The additional capital will enable Hightower to continue to expand its institutional-class services to catalyze organic growth, while at the same time fueling the firm’s RIA acquisition strategy,” he added.
After THL's initial investment, new executive leadership was put in place at Hightower. It changed its focus from courting broker-dealer breakaways to concentrating on RIA acquisitions, becoming a leader in that area.
Hightower "has experienced really significant growth, not just from mergers and acquisitions but organically through same-store sales," said Mark Bruno, managing director at Echelon Partners, an investment bank and consulting firm specializing in the wealth management sector.
Hightower has announced eight merger and acquisition transactions this year through the end of November. It did four M&As in 2019. At the end of September, the company had $61.6 billion its assets under management.
“I am thrilled that THL, which has been a supportive partner for Hightower since 2018, has validated Hightower’s business strategy by committing to us for this next chapter of growth and value creation for clients, advisors and shareholders,” CEO Bob Oros said in a statement. “We are also very honored to have so many top-tier investors bringing fresh capital to support the expansion of our wealth management service organization and advisory businesses for many years to come.”
Hightower has 113 advisory businesses in 33 states. It offers a range of services to the independent advisers in its network, including technology, compliance, investment management, marketing and business development.
Hightower, along with firms like CI Financial, are changing the RIA landscape with their appetites for RIAs with $500 million or more in assets under management, Bruno said.
"These performance buyers are becoming more and more competitive, and they're all targeting larger and larger RIA firms," he said.
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.
“I respectfully request that all recruiters for other BDs discontinue their efforts to contact me," writes Thomas Bartholomew.
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