Savant Capital Management, already about a $5 billion RIA, is preparing to get much bigger.
The Rockford, Ill.-based registered investment adviser has secured $50 million from private investors to buy the interests of retiring co-founder Tom Muldowney, and has an agreement for many more millions to fund acquisitions, perhaps growing to as large as $50 billion in assets under management, said chief executive Brent Brodeski.
The investors include: Ron Carson, CEO and chairman of Carson Group Holdings; Charlie Johnston, former president of Morgan Stanley Smith Barney; an eclectic group of private families; a publicly traded merchant bank; and about a dozen others.
“We need material capital to increase the number of and size of transactions we want to do to expand,” Mr. Brodeski said. “This transaction aligns us with deep pockets.”
Securing long-term capital and remaining independent were priorities for Mr. Brodeski, who chose not to seek investment from private-equity firms that typically demand liquidity in three-to-five years.
(More: Private-equity firms ramp up M&A in RIA industry)
Under terms of the deal, Savant's employee group retains a significant controlling interest, owning more than 75% of the business. The employee group will expand from 19 to 47 people, as more shares became available with the departure of Mr. Muldowney.
Mr. Brodeski himself added a large new equity investment in the firm he co-founded in 1993.
The new investors are long-term oriented and can't require Savant to sell the firm, Mr. Brodeski said.
Savant has completed five acquisitions in as many years, buying up advisory firms with $100 million to $500 million in assets.
“We didn't go looking for any of them; it's been random,” Mr. Brodeski said. “Now we're going to go after acquisitions deliberately instead of waiting for them to show up.”
The targets may be “tuck ins,” where Savant acquires firms with $100 million to $750 million in assets under management and merges these businesses with existing Savant offices, which today reside in and around Chicago, the Northern Virginia suburbs of Washington, D.C., and Madison, Wisc.
Savant also would be interested in buying larger practices of up to about $1.5 billion in assets that are located in new geographic markets for Savant, Mr. Brodeski said.
(More: Brent Brodeski: How to create a wealth transfer process for clients)
Mr. Carson said his $7.8 billion advisory firm,
Carson Wealth Management Group, will benefit from this deal, including tapping economies of scale to offer additional pricing benefits to clients and further collaborating with Savant. Carson Wealth already partners with the firm today, delivering Savant's 401(k) platform to its clients and others affiliated with the Carson Institutional Alliance.
“The world is changing rapidly and we are on the eve of disruption that is 10 times greater than the average adviser realizes,” Mr. Carson said. “Size, scale and finding ways to add value are becoming table stakes.”
Mr. Carson recently
sold a 29% stake in his firm for $35 million to investors led by private-equity firm Long Ridge Equity Partners, because his firm also plans to growth through acquisitions.
The private-equity groups invested in Carson Wealth have a seven-to-10-year time horizon, according to Mr. Carson.
The two executives are members of the same high-level study group called the Alliance for Registered Investment Advisors. They're also friends, Mr. Brodeski said.
“We've been good sounding boards for each other's businesses for years,” he said.
