Private equity firm TA Associates is buying Wealth Enhancement Group from Lightyear Capital, four years after Lightyear became WEG’s majority owner. WEG’s RIA has $11.8 billion in client assets vs. $4.7 billion in mid-2015.
The news comes about three months after Goldman Sachs bought United Capital, which has an RIA with about $23.4 billion in assets, for $750 million.
“Whew, big industry news – TA Associates is buying ~$12B Wealth Enhancement Group,” said popular blogger and planner Michael Kitces on Twitter. “It seems the UC-Goldman deal really lit a fire under PE firms to sell at currently favorable valuations?”
As for the deal’s timing, Kitces added: “Striking to see that Lightyear Capital (WEG’s now-former owner) was a seller here after “just” 4 years, but not entirely surprising. The eye-popping valuation that Goldman set for United Capital put $$$ in the eyes of many firms. Too much risk to wait out next bear market cycle?”
TA Associates invests in a variety of industries. It bought a majority interest in NorthStar Financial Services Group, including tech provider Orion Advisor Services, in 2015. In 2016, the private equity group bought asset manager Russell Investments.
“It seems that TA Associates REALLY likes the RIA vertical…,” Kitces said in a Tweet.
Others agree. “Private equity firms continue to vote with their wallets for the independent mode,” according to David DeVoe, head of RIA consulting firm and investment bank DeVoe & Co.
“Transactions like this will not only help firms like WEG accelerate their growth, but also contribute to the RIA industry overall with innovation in and the expansion of the fiduciary approach to wealth management,” DeVoe said.
Like United Capital, WEG has been aggressive with its technology investments in order to boost “both scale and growth within the RIA space,” he adds.
As for the deal’s price, Kitces said there’s “No way to know if it’s not publicly disclosed. Deals of this size have rumored to be running as high as 2.5X revenue or even a little more, but we don’t really know what WEG’s margins were (as it’s really a multiple of EBITDA, not revenue, that drives the deal price).”
Jeff Levine — who leads advisor education at Kitces.com — wishes the price tag had been made public. “Wowza! This is a mega-deal! Would love to know the exact terms,” Levine tweeted.
In terms of WEG’s own take on the transaction, CEO Jeff Dekko said the group “couldn’t be happier … [n]ot only is TA Associates a perfect fit with our firm in terms of cultural values, strategic vision and commitment to growth, we have several years of mutual familiarity between our leadership teams.”
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