April 9, 2012

Envestnet Closes on Prima Capital Acquisition

Prima’s Gib Watson becomes group president of Envestnet | Prima

Envestnet Inc. (ENV) announced April 5 that it had closed on its acquisition of Prima Capital, the Denver-based provider of investment manager research, due diligence and asset allocation modeling. Former Prima CEO Gib Watson will head a new operating division within Envestnet called Envestnet | Prima as group president. In addition, Prima’s Cliff Stanton will continue to head the company’s research team as chief research officer and portfolio strategist for Envestnet | Prima.

In its release on the closing of the acquisition, Envestnet noted that Prima’s clients include seven of the top 20 banks in the U.S. by total assets, regional broker-dealers, trust companies and accounting firms. Prima’s team will remain headquartered in Denver, but will relocate two blocks to Envestnet’s Denver offices, or as Watson described it in a February interview with AdvisorOne, as "a weak seven-iron shot" away from Prima’s current offices.

The acquisition was first announced in February 2012, when Envestnet said it would acquire Prima for $13.7 million. It was the second of three acquisitions within the past six months by Chicago-based Envestnet, a provider of a wealth management platform for broker-dealers and RIAs that includes portfolio management, research, advisory services and tools.

Envestnet Chairman Jud Bergman.In December 2011, Envestnet closed on the acquisition of BNP Paribas’ U.S. TAMP operation Fundquest, for $24.4 million in cash. It announced the pending acquisition of Prima on Feb. 10, 2012, for $13.7 million, also in cash. On Feb. 16, 2012, it said it would acquire the portfolio management technology company Tamarac for $54 million in cash. In an interview following the Tamarac announcement, Envestnet Chairman and CEO Jud Bergman (left) said, "We’re a strongly positive cash flow company; so we’re generating cash," but that going public in 2010 "gave us the means to implement our strategy."

Adding FundQuest, Tamarac and Prima will be accretive to Envestnet in the broadest sense. Following the stated deal for FundQuest, Bergman said further acquisitions were possible.

The acquisitions may help Envestnet grow beyond Bergman’s stated goal of 20% organic growth, partly through providing entree to a different tranche of advisors (such as Tamarac’s large-RIA client base or Prima’s presence in the bank channel). In addition to acquisitions that are financially accretive are ones that Bergman calls “value accretive” deals, in which deals include technology or products that can enhance Envestnet’s existing platform (such as Prima’s expertise in due diligence and access to the bank channel, and FundQuest’s TAMP products and investing human capital, which will bolster Envestnet PMC’s offering).

In addition to the companies, the deals will also add to Envestnet’s ranks thought and business leaders from these most recent acquisitions such as Watson of Prima; Stuart DePina from Tamarac, which is slated to become Tamarac|Envestnet and will be run, like Prima, as a separate operating division, according to Bergman; and Tim Clift from FundQuest, who was named chief investment strategist of Envestnet|PMC following the close of the FundQuest acquisition.

(Prima Capital, Investment Advisor and AdvisorOne have collaborated for the last eight years on picking the annual SMA Managers of the Year; see the 2012 honorees from the April 2012 issue of Investment Advisor here. Gib Watson has also contributed regular commentary for AdvisorOne since the site’s launch in 2010 (see his latest blog here on the ‘alpha thesis’ exhibited by top money managers.)

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