One week after it became a publicly traded firm, Focus Financial Partners says it has a new member: Edge Capital Group of Atlanta, which as some $3.5 billion of client assets and six offices.
“We are very impressed by the Edge team’s commitment to excellence in everything they do,” Focus CEO Rudy Adolf said in a statement. “Edge would be an exemplary M&A platform for other entrepreneurial RIAs in the region.”
Focus’ shares now trade just under $39. In mid-July, before it went public, the RIA consolidator had set it a target price at $35 to $39 for the 16.2 million shares it planned to issue.
The firm, which has more than 55 partner RIAs, went public at $33 on July 26, but ended its first trading day at around $37.50. As of early Friday, its market capitalization was over $2.5 billion.
Focus’ IPO is a “huge deal” for the RIA industry as it “provides a way for others to follow in its footpath,” said Louis Diamond, executive vice president of Diamond Consultants, in an interview. “It validates the fact that the RIA space is not only a trend.”
With the Focus IPO, the RIA industry has “a great real success story,” Diamond says. “This lets advisors, employees and partners recognize the value of the equity. They can monetize their equity, and there is a liquid market for those who buy the equity.”
Future partners, for instance, could see big gains by working with Focus, he explains. As small firms move to sell an interest to Focus, they receive cash and equity. Their stakes might be sold with a multiple of five times free cash flow, but they could sell their stake in Focus for a multiple of 16-18 times.
Could the industry could see more IPOs from RIA-related firms? “Yes, definitely,” Diamond said.
Founded in 2006, Edge serves ultra-high-net-worth clients in the Southeast and Southwest. Its founders include Bert Rayle, Harry Jones, Bill Maner, Paul Izlar, Peek Garlington and Will Skeean, who previously worked at Goldman Sachs, Credit Suisse and Morgan Stanley.
“With Focus’ support, including access to capital and best practices, we will be able to further enhance our client service and expand further in our core markets and to other attractive regions,” said Edge Managing Partner Harry Jones in a statement.
Outside of Atlanta, the group has offices in Dallas; Charlotte, North Carolina; Tampa, Florida; Nashville, Tennessee; and Lexington, Kentucky. It recently added eight “next generation” partners: Dennis Sabo, Paul Robertson, Whit Davis, Elizabeth Mackie, AK Hendrix, Jimmy Patrick, William DeButts and Kendrick Mattox.
Focus says the Edge transaction is one of the three signed but not closed deals that it disclosed earlier.