RIA Rollup Mercer Advisors Attracts Another Private Equity Firm
Oak Hill Capital, a private equity firm with roots managing the Bass brothers’ family fortune, is buying a stake in Mercer Advisors, the fast-growing Denver, Colorado-based registered investment advisor aggregator.
Oak Hill, also an investor in Edelman Financial Engines and broker-dealer Hilltop Holdings, will purchase its holdings in Mercer from Genstar Capital and Lovell Minnick Partners, Mercer said on Tuesday.
Terms of the arrangement were not disclosed, but Mercer said Genstar will remain a “strategic partner.” When Genstar hired Goldman Sachs this summer to shop its majority stake, it was seeking a valuation as high as $750 million, according to the “Buyouts Insider” newsletter.
In a news release, Mercer said the transaction will give it “significant additional capital” to expand. The RIA restructured its debt earlier this year, and the replenishment of equity “gives us a very long runway” to execute growth strategy, Mercer Chief Executive Dave Welling said in an interview. The firm, which has 44 financial planning offices overseeing more than $16.5 billion, will add at least 16 acquisitions in 2019, Welling said.
Mercer’s ability to relatively quickly attract another private equity investor underscores the growing interest of “smart money” in retail financial services for mass affluent and wealthier investors, according to some analysts.
“The business model that plays on creating a larger RIA, a scalable RIA, is still something that some PE firms are very interested in,” said Alois Pirker, research director for Aite Group’s wealth management practice.
Goldman purchased United Capital, another RIA aggregator, for $750 million in July. Private equity firms, for their part, have participated in 5% of all RIA merger transactions since 2013 and accounted for 26% of the deals as measured by assets under management, according to M&A consultant DeVoe & Co.
Since Genstar bought its majority stake in 2015, Mercer has made 23 acquisitions, growing from $5.8 billion in assets to the $16 billion-plus it advertises today, it said on Tuesday.
“Private equity continues to be a driving force shaping many large and rapidly growing RIAs,” said Scott Slater, vice president of practice management & consulting at Fidelity Clearing & Custody Solutions.“These RIAs tend to be very intentional when choosing a PE partner as they seek both capital and management expertise to accelerate their movement to the next level.”
Oak Hill generally makes investments of $100 million to $300 million in consumer, retail, industrials, and media companies, according to its website.
It loaned $50 million in 2011 to the parent of Dallas-based Southwest Securities, a company that has since evolved into Hilltop Securities, and continues to be a Hilltop investor. Oak Hill, which is based in New York, also led an $85 million funding round for Financial Engines in 1999. That investment soared in value when private equity firm Hellman & Friedman bought Financial Engines last year for $3 billion and merged it into mega-RIA Edelman Financial Services.
Oak Hill remains an investor in Edelman Financial Engines, according to its website.
Lovell Minnick, which bought a majority of Mercer in 2008, has been divesting its stake and now appears to be making a complete exit.
“We have enjoyed our collaboration with the Mercer Advisors management team for over a decade,” Co-Chairman Jeffrey Lovell said in a prepared statement. “We wish the team continued success as the company writes its next chapter.”