Boston-based private equity firm TA Associates has agreed to acquire a majority stake in Omaha-based NorthStar Financial Services Group, the holding company that includes ETF strategist CLS Investments, mutual fund administrator Gemini Fund Services and Orion Advisor Services, the outsourced portfolio accounting and management service. No financial details of the investment were disclosed.
In an interview Monday, Eric Clarke, CEO of Orion, and Todd Clarke, CEO of CLS Investments, spoke of the process that resulted in the eventual partnership with TA Associates and how TA’s investment will facilitate NorthStar’s continued growth. Both men retain significant ownership stakes in NorthStar and will remain in their management positions.
Eric Clarke said that when one of NorthStar’s partners announced his departure, “we talked about going public,” but that route didn’t seem to fit with NorthStar’s entrepreneurial culture. “We talked to a lot of private equity investors,” he said, but after a dialogue for several years that intensified over the past four months, management settled on TA Associates.
“They truly understood our businesses; they invest in RIA firms already,” he said. He noted as well that TA “was not the highest bidder,” but stood out “in terms of preserving the culture” at NorthStar.
“Todd and I still have a lot of equity in the business and we wanted to align ourselves with a partner that could take us to the next level,” he said.
Following the close of the deal, expected in 2015’s second quarter, two managing directors from TA Associates will join NorthStar’s board: Todd Crockett, formerly of Salomon Brothers, and M. Roy Burns, formerly of Davidson Kempner Partners and Banc of America Securities.
TA Associates’ current and former investments in financial services include asset management firms like AIM, First Eagle and Stadion; RIAs like Thomson Advisory Group and Keeley Asset Management; and financial technology companies like BATS Global Markets.
Todd Clarke said “We’re hoping for the board to help generate fresh ideas” to facilitate NorthStar’s continued growth, building on the company’s strong organic growth through acquisitions, and stressed that “management is all staying in place.”
As for TA Associates’ interest in NorthStar, Eric Clarke is confident in the PE firm’s commitment, reporting that TA has “an over-seven-year average hold period” for their portfolio companies.
Speaking of technology, which NorthStar knows well, Todd Clarke said that in considering the robo-advisor threat, “the advisor model will win if they embrace the technology tools that robo-advisors are making available to investors. They have to up their game and change the client experience in an economical and forward-thinking way.”
Eric Clarke said that particularly at Orion, “we’re big believers that advisors need to use technologies to forge deeper relationships” with their clients. Doing so will “create opportunities for them over the next five to 10 years as we go through this technology evolution.”
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