Fisher Investments, a nationally registered investment adviser with more than $275 billion in client assets, announced plans Sunday to sell a minority of shares in the firm Advent International and a subsidiary of the Abu Dhabi Investment Authority in a deal that values the RIA at $12.75 billion.
And while that valuation may raise some eyebrows in the wealth management industry, active investment bankers in the space agree it's standard for a firm of Fisher's size, scale and organic growth rate.
Michael Wunderli, managing director at Echelon Partners, said it's hard to come up with an accurate valuation without knowing all of Fisher's finances. But using some middle-of-the-road assumptions based on the firm's AUM, its average fee and the profit margins that can reasonably be expected from a firm like Fisher's, a bottom-of-the-envelope valuation falls around $12 to $14 . billion. That requires a multiple of 20 times EBITDA, he said, which is high but not out of bounds for RIAs, especially given Fisher's unique characteristics and marketing know-how.
“It's a well-known name; has the brand; it has a proven track record over a long period of time,” Wunderli said. “So these are a lot of things that most wealth management firms don't really have, or at least not to this extent. This definitely strengthens the rating.”
If it were a majority buyout by a strategic buyer, he would expect to see an even higher multiple.
“Fisher is a standout in his own right,” said Harris Baltch, managing director and head of investment banking at Dynasty Financial Partners. “They're a national wealth management firm that's been around longer than most, and the ownership was really concentrated … primarily with one individual, which was Ken (Fisher).
Fisher's valuation is more than justified, Baltch said, given its size and scale. But the deal doesn't set a new benchmark for RIA valuations more broadly, he said.
“It's very difficult to isolate a specific transaction and say that that one specific transaction is going to anchor or pull a valuation in one direction or another,” he said. “It's certainly something that I think new platforms that are looking to scale will certainly aspire to, but I think it's going to be very difficult to find that lack of independence value at the size of a firm like Fisher . in, and go to market and expect to get the exact same terms.”
“The price premium for RIAs continues, but there is an increased interest and sensitivity to make sure that premium goes to firms that have good organic growth histories, which Fisher certainly does,” said Brian Lauzon, director managing director at Colchester Partners, a Boston-based investment firm. bank.
John Langston, founder and CEO of Republic Capital Group, said this transaction sets a new watermark for valuations for firms with growth and vision similar to Fisher's, although he also argues that valuations are too dependent on too many variables to apply. a Fisher multiple across the board.
However, Langston said the deal is more important as a turning point in the evolution of the independent wealth management space.
“I see this transaction as a harbinger of things to come,” Langston said. “It will certainly happen again, and I hope to be in the middle of it personally.”
Fisher might be three or four times its size in terms of AUM; Creative Planning could be five times bigger, he said.
He believes that concerns in the industry about where the next capital will come from and the next transaction are misplaced. While Fisher received some private equity, he also attracted a sovereign wealth fund. Last year, Canadian asset manager CI Financial sold a 20% stake in its US wealth management unit, now known as Corient, to a group of investors including Bain Capital and the Abu Dhabi Investment Authority. That deal valued Corient at about $5.3 billion. Before that, CI had plans to take the American wealth business public.
“I agree that there are complexities and challenges around the public markets right now for some of these firms, but equity groups extend so far beyond private equity more than people realize,” he said. “My perspective has been that we are fortunate that our wealth management model that we have in this industry is the most superior approach anywhere in the world.”
“Deals like this, especially of this size, indicate an increased interest not only for traditional PE firms, but also for other capital groups to gain exposure to the private wealth management industry and the macro trends that are driving growth. of the industry,” Lauzon said.
Baltch said Dynasty has received calls over the past 12 months from investment firms it had never heard of before.
“They're reading about what's going on or maybe they have an ancillary portfolio investment that could benefit from a synergy of acquiring a wealth management firm, so they're calling us to learn, to get educated.”
Wunderli says this transaction now brings Advent's M&A expertise to Fisher as well as the capital to pursue its own investment opportunities, which would be a new endeavor for Fisher. He could see the firm becoming a major strategic buyer of large national RIAs.
“If Fisher starts buying big RIAs and then they have all these resources to compete at even a higher level, that presents new competition for these big RIAs on the buy side, but also on the advisor side. of onboarding and being an attractive place to go to work,” Wunderli said.
“I would be surprised if there weren't bigger plans in the works to do some sort of inorganic growth, expand into new lines of business or buy advisory assets.”