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KKR, Stone Point to Buy Focus Financial Majority Stake

By Murray ColemanAlex Padalka April 19, 2017

An investor group led by private equity firms Stone Point Capital and KKR is acquiring a majority stake in Focus Financial Partners, Focus says in a statement.

The deal values Focus Financial, a partnership of more than 45 independent wealth management firms in the U.S., Canada, the U.K. and Australia, at around $2 billion, according to the firm.

The selling shareholders include current private equity investors as well as several employees and wealth management affiliates of Focus, the company says.

Focus’s senior executives, including Rudy Adolf, founder and CEO, will remain at the helm of the company, according to Focus. The deal is expected to close by the middle of the year, the company says.

Focus made more than 20 acquisitions last year and six more in 2017, according to the statement.

The firm has also stated in the past its intentions to come out with an IPO. But companies often make overtures about going public when they’re actually soliciting interest for a deal, observers point out.

Yet nothing on the IPO front actually took place. Still, some M&A experts tell FA-IQ that they believe Focus did receive expressions of interest in buying a stake from such initial overtures, even though none came to fruition.

“This is a deal everyone’s been waiting for,” says Elizabeth Nesvold, managing partner of investment banker Silver Lane Advisors. “Whether you’re a fan of their business model or not, everyone is rooting for Focus.”

It’s generally difficult to value true wealth management firms since “there are so few true comps available to benchmark businesses,” Nesvold says.

Rudy Adolf

With big asset managers recently undergoing negative fund flow situations in many cases, “you’re seeing a depressed set of multiples” that makes valuing faster-growing pure-play wealth managers difficult to size up, according to Nesvold, who has helped to broker deals in the past involving RIAs joining the Focus network.

“That’s why so many people in this industry are going to be happy to hear about this deal — it’s going to set a new and likely clearer benchmark for this industry as opposed to asset management.”