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headshot of Focus Financial leader Rudy Adolf

Industry Spotlight > Mergers and Acquisitions

Focus Financial Expects to More Than Double Revenue Over Next 4 Years

By Jeff Berman

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What You Need to Know

  • Focus Financial expects to grow revenue from the $1.8 billion it reported for 2021 to about $4 billion in 2025.
  • Reaching its growth targets will require Focus to increase its number of partner firms by about 50%, CEO Rudy Adolf says.
  • The $161.9 million that the company raised in December gives it additional working capital flexibility to capture M&A opportunities globally.

Focus Financial Partners has set aggressive financial targets for 2025 that include more than doubling its annual revenue from the $1.8 billion for 2021 it reported on Thursday to about $4 billion in 2025, according to Rudy Adolf, the firm’s CEO, chairman and founder.

The company, meanwhile, plans to continue pursuing mergers and acquisitions, which will play a key role in that growth.

“We have made substantial progress in the evolution of our business, with the COVID crisis reinforcing the stability and resiliency of our business model,” Adolf told analysts during an earnings call on Thursday. “And we increased our 2025 financial targets to reflect this.”

In addition to the revenue target, Adolf said his company is looking to report adjusted earnings before interest, tax, depreciation and amortization of $1.1 billion and adjusted EBITDA margin of 28% in 2025, “supported by a future partnership of approximately 125 firms.”

To hit those targets in “about four years’ time requires that we more than double the size of our revenues and adjusted EBITDA, while increasing the number of partner firms we have by about 50%,” he said.

“We believe that these targets are aggressive, but achievable,” he told analysts. Focus Financial continues to “attract some of the highest quality firms in the industry, and we ended 2021 with 84 partner firms in four countries,” he said.

The company entered 2022 with “excellent momentum, extending the strong pace of activity we experienced last year [and is] working on a substantial pipeline in the U.S., Australia, Canada, and the U.K., and plan to expand into other countries,” he disclosed.

The $161.9 million in equity that the company raised in December, meanwhile, “demonstrated our ability to access the equity markets to further support and capitalize on the attractive M&A opportunities that we expect in 2022 and beyond,” he told analysts.

While full-year revenue grew 32.1% from 2020, revenue for the fourth quarter ended Dec. 31 grew 38% to $523.9 million.

In 2021, more than 95% of the firm’s revenues were recurring, he said. “However, what made 2021 a standout year was the acceleration of our M&A momentum, as we capitalized on the industry consolidation opportunity in a disciplined way.”

The company closed a record 38 transactions in 2021, including 14 partner firms and 24 mergers, inclusive of eight mergers for partner firm Connectus, which expanded the company’s footprint in Australia, Canada and the U.K., he said.

Although the company’s M&A closures will be lower in the current quarter than the prior one, “given the substantial number of deals we completed in late Q4, our pipeline for 2022 is substantial, and we anticipate that it’ll expand further, particularly as the number of our partner firms that use mergers to accelerate their growth increases,” according to Jim Shanahan, Focus Financial’s chief financial officer.

“Connectus also has a robust pipeline and will expand its global footprint in 2022,” he said, adding that the capital that Focus Financial raised in December “will provide us with additional working capital flexibility to efficiently capture M&A opportunities globally.”

(Pictured: Rudy Adolf, CEO of Focus Financial)

Jeff Berman

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