RIA Roll-up Creative Planning Sells Stake to PE Firm General Atlantic
Creative Planning, an Overland Park, Kansas-based advisory firm that has been an aggressive aggregator of smaller RIAs in the past year, has sold a minority stake to private equity buyer General Atlantic, the companies announced on Friday.
Mallouk said he decided to tap outside capital for the first time because of the attractive valuations. Creative Planning had enough cash on hand to continue making acquisitions but wanted to build up its reserves to bolster against a potential downturn in the market, he said.
“[V]aluations are very high right now – unprecedented – so it made sense to sell a minority, non controlling stake to ensure we can continue to work towards our goals,” Mallouk wrote in an email.
The deal follows a record year for mergers and acquisitions of RIAs that was driven in part by serial acquirers like Creative Planning. The firm two weeks ago purchased Stratford Consulting, an Addison, Texas-based RIA with approximately $618 million in assets under management.
Mallouk founded Creative Planning in 2003 with the purchase of an RIA with $100 million in assets and grew it to $38 billion in assets through referrals before shifting its strategy last year to focus on acquisitions. It made its first deal in February 2019 with the purchase of the Johnston Group, a Minneapolis RIA with over $500 million in client assets.
It bought America’s Best 401k in Scottsdale, Ariz. in September and in November purchased McLean, Virginia-based OptiFour Integrated Wealth Management which oversees about $400 million of customer assets. In December, it snapped up Hogan Financial, a Milwaukee RIA managing about $300 million of customer assets.
New York-based General Atlantic, which was established by Chuck Feeney, co-founder of Duty Free Shoppers, has 114 portfolio companies, including 23 financial services companies, according to its website. Its holdings include a stake in the digital money manager SigFig, which powers ‘robo’ advisors for UBS Wealth Management USA and Wells Fargo Advisors.
“Creative Planning stands well-positioned as an industry leader to capture the significant opportunity that exists in the registered investment advisor space, and we are energized to be partnering with the Company as it continues its expansion,” said Paul Stamas, managing director and co-head of financial services at General Atlantic, in a prepared statement.
The number of announced mergers and acquisitions in the RIA space rose 31% from 2018 to 132 deals last year, according to data from DeVoe & Company, an RIA-focused investment bank. The momentum continued into January, with 18 transactions compared to the 12 in January 2019 and 14 in 2018.
“It’s hard to ignore the record-high valuations,” David DeVoe, founder of the eponymous firm, wrote in an email. “In some cases, firms are deciding to take advantage of the timing to diversify concentrated stock positions and add some dry powder to the balance sheet.”