Rockford, Ill.-based RIA firm Savant Capital Management announced it completed a transaction Sept. 30 in which it added employee owners, high-profile partners like Ron Carson and $50 million in capital from a range of investors.
The deal solves succession planning and ownership issues for the $5 billion AUM firm, but also gives it the financial heft to continue its growth plans, according to co-founder and CEO Brent Brodeski, while retaining the firm’s independence.
The number of employee owners of the firm has risen from 19 to 47, while Brodeski said he is “doubling down” on his own investment in the firm, has “brought in good partners” and now has the “deep pockets to do more and larger” acquisitions in the RIA space.
The deal took more than a year to put together, Brodeski said, and was prompted by the decision of Savant Capital’s co-founder, Tom Muldowney, to “retire and take his chips off the table.” That decision “set some things in motion” and “early in the process” Brodeski worried that “we’d have to sell the business,” but since the “team felt strongly about staying independent,” he “figured we had the opportunity to grow” the firm “10x,” but needed additional capital and expertise to do so.
Brodeski said “we had 70 capital-raising discussions and 12 proposals.”
Brodeski reported that “there’s a lot of capital out there,” but he and his team determined that many buyers “didn’t bring anything other than the check.” Instead, Savant now has a board that includes Cynosure Group’s Keith Taylor; the former CEO of SmithBarney, Charlie Johnston; three single-family offices; a publicly traded merchant bank; Kingsway Financial Services; Ron Carson of the Carson Group and additional private investors.
Those investors are not only bringing $50 million in capital, plus “additional future capital commitments,” but also their “connections and expertise and knowledge,” Brodeski said. However, the employee owners will retain more than 75% ownership of Savant Capital Management, ensuring its independence, and in a statement, Savant said the private capital investors are “longterm oriented and cannot require Savant to sell the firm.”
Brodeski said, with the new board members’ experience in “scaling businesses,” he believes he can grow Savant “10X over the next five to seven years.” The “money is table stakes,” he said, referring to the capital investment; “phase two is where the great opportunity lies.”
So does that “opportunity” include becoming a national advisory firm? “‘National’ is pretty big,” Brodeski said in an interview Sept. 30, calling Savant’s geographic goals more “multiregional,” but he added the firm will be “hashing out our M&A strategy next week.”
Savant has made six acquisitions over the past five years using its own capital. “We’ve been an operating company primarily, with a sidecar of M&A,” Brodeski said. Now with the capital infusion and expertise of its new board members, Savant can increase its deal activity: “this is a way to get top talent and to move into new geography.”
The size of its acquisitions can also grow, according to Brodeski. Up to this point Savant’s acquisitions have ranged from $100 million to $500 million in AUM, but “with this group of partners” Savant can look at firms with $1 billion to $1.5 billion. Those deals are more attractive, he said, “because you get the scale and substance to go into a new market and be relevant…and to support the leadership team in that market.”
Those larger deals will also allow Savant to attract more advisor talent—“people want to be affiliated with winners,” but also noted that “size reduces risk.”
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