Private equity firm Thomas H. Lee Partners recently took Hightower off the market because it didn't get the price it was asking from potential buyers, according to sources close to the firm and investment bankers involved.
Citywire.com first reported that THL was pursuing a $130 billion sale of its majority stake in the RIA platform and that the private equity firm had pulled it from the market.
Several sources close to the process say that THL could not find a buyer willing to pay the required amount.
“What they were looking for was a multiple that would have justified to their existing LPs that this was a good investment that they would get a good return on,” said one source.
According to the sources, who declined to be named, THL interviewed at least six private equity firms about the possibility of buying Hightower, but only two firms came forward with offers. THL was looking to fetch 13 to 16 times EBITDA, roughly the same range Focus Financial Partners earned when it went private. These sources said the bids were in the range of 7 to 10 times EBITDA. After extensive negotiations, one of the two firms offered 10 times EBITDA, their last and final offer.
“That's why Hightower ended up not pursuing it further,” a source said. “At this point, they're in a tough spot. You can look forward to significant layoffs which I think are now on the horizon.”
THL is exploring reducing headcount in its home office to improve Hightower's EBITDA in case it decides to go public in a year or so, according to the sources.
Spokesmen for both THL and Hightower declined to comment.
In March interview with Hightower CEO Bob Oroshe said THL was not looking to sell Hightower.
In Aprill, Hightower named Gurinder Ahluwalia, chief executive of the firm's board of directors, president, a newly created position. Ahluwalia is an executive partner in THL's financial technology and services vertical.
Last week, Meghan McCartan, who stepped into the lead role of marketing to Hightower in 2021, left the company, according to a LinkedIn post. McCartan, who became chief marketing officer at Hightower in July 2022, shared the “bittersweet update” that she had left the firm, saying she was unsure but excited about her next opportunity.