Carlyle Group Buys Minority Stake in Avalon Advisors

Investment reflects private equity firms’ interest in financial advisory world

The Carlyle Group, one of the world’s largest private equity firms, has made a minority investment in Avalon Advisors, a Houston-based wealth advisor and asset manager with nearly $4 billion in assets under management, the two companies announced Tuesday.

Financial terms of the transaction signed last week were not disclosed by company officials, who did not return requests for comment.

(On Aug. 6, Carlyle announced it would go public, filing with the SEC for an initial public offering worth an estimated $100 million.)

However, the news release announcing the deal stated that equity for the investment comes from Carlyle Global Financial Services Partners, a $1.1 billion fund that invests in a range of financial services companies.

Platform Partners, a private investment firm, will participate in the recapitalization “with a significant portion of its existing stake in Avalon” and continue to serve as a strategic partner, according to the release. The Carlyle financial services partners have made 11 investments to date in financial firms.

“We believe this new partnership will better enable us to expand our spectrum of investment solutions with a partner who can provide expertise in complementary asset capabilities,” said Robert Gauntt, one of the founding partners of Avalon, in a statement. “This investment by Carlyle is in line with our desire to maintain operating independence with a partner who understands our business, our client base and works collaboratively with management.”

The deal highlights private equity investors’ growing interest in the financial advisory business model and wealth management industry.

In another deal announced earlier this month, independent broker-dealer First Allied joined in an acquisition deal with private equity firm Lovell Minnick Partners, allowing the BD and Lovell to buy First Allied from parent Advanced Equities Financial Corp. LPL Financial was a leader in the private equity-driven sale of BDs back in 2005, when it sold a majority equity interest in the company, about 60%, to two private equity shops.

Founded in 2001, Houston-based Avalon Advisors employs 25 people and manages equity, fixed income and balanced portfolios for wealthy families, endowments, foundations, trusts and institutions across the United States. The firm is led by four of the founding partners, Robert Gauntt, Henry Lartigue, Willie Langston and Kevin Lilly.

Based in Washington, D.C., the Carlyle Group is a global alternative asset manager with approximately $153 billion of assets under management across 89 funds and 49 fund of fund vehicles as of March 31. Carlyle invests around the world in corporate private equity, real assets, global market strategies and fund of funds solutions. The Carlyle Group employs more than 1,100 people in 35 offices across six continents.

Carlyle Managing Director Randy Quarles, who was involved in putting the deal together, previously served as undersecretary of the U.S. Treasury during the administration of President George W. Bush. Before entering the Bush administration, Quarles was a partner with the law firm of Davis Polk & Wardwell.

Advising Carlyle on the deal were financial advisor Samoset Capital Group and legal counsel Davis Polk and Wardwell. Advising Avalon were financial advisor Silver Lane Advisors, legal counsel Vinson & Elkins and regulatory counsel Dechert.

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