What You Need to Know
- Orion had been seeking to acquire Redtail for several years, but the time was right for both firms this year, their CEOs say.
- CRM was the one big offering for advisors that Orion had been lacking.
- Timothy Welsh of Nexus Strategy sees the deal as a major blow for Orion rival Envestnet.
The deal that Orion Advisor Solutions reached to acquire Redtail Technology, announced Tuesday, was several years in the making, and everything finally came together early this year when the timing also became right for Redtail, the CEOs of each company told ThinkAdvisor in an interview on Wednesday.
Redtail, led by Brian McLaughlin, its CEO and co-founder, is a client relationship management software firm focused on the wealth management industry, and CRM is a major component of the financial services sector that Orion has been missing.
“We’ve been asking Brian if there was an opportunity to do this deal for a number of years and this year the opportunity kind of came together, so to speak, and the timing was great for both of us,” according to Eric Clarke, CEO and founder of Orion Advisor Solutions.
“It’s no secret that Redtail has a series of raving fans in the marketplace,” Clarke said. “They have incredible market share. They have high user satisfaction.”
In addition, “when we stepped back and looked at the integrations that we support with the open-architecture platform here at Orion, Redtail has more integrations with our user base than any other integration that we have in place today,” Clarke pointed out.
“Over 30% of our Orion customer base is already using Redtail, which made this just an unbelievable opportunity from our perspective,” he added.
With all that in mind, “I’ve been reaching out to Brian for years, like on a regular basis,” Clarke said, noting that it was “on my calendar [but] I can take the reminder off now.”
Clarke added: “I used to lose sleep over the thought of this transaction going in a different direction. So this was really, really strategically important to us.”
‘The Stars Aligned’
McLaughlin declined to say if other firms, such as Envestnet, had also approached him to acquire Redtail.
But at least part of the reason that McLaughlin agreed to be acquired by Orion was his long relationship with Clarke.
“We worked together on a number of projects,” McLaughlin said. “We’ve been doing the hackathons together [and other] industry events together. There’s been a lot of connections over the years.”
Finally, early this year, “the stars aligned,” McLaughlin told ThinkAdvisor. “It was a crossroads for me strategically,” he explained. “We’re doing really well,” but he wanted to take Redtail “to the next level,” he said. “I really want to innovate for the advisors. I want to innovate for the industry and scale it up.”
When he looked into how to best achieve that, there were a couple of choices, McLaughlin said. “To me, one of the most important options is working with somebody who understands the business, who has the same values and core principles of foundational aspects that we’ve always had and that we believe in so strongly.”
That was certainly the case with Clarke and Orion, and “that’s why this was a match made in heaven,” according to McLaughlin.
When he spoke to Clarke, “early on I told him … [to] be really crystal clear here, I want to work. I want to keep going. I want to drive value and I want to provide value,” McLaughlin recalled.
“It was important to me that they understood I’m still committed to all this and I’m committed to the advisors’ success,” McLaughlin said. “I’m committed to my employees’ success, their employees’ success. … So that was just important to me, no matter which direction Redtail went. That was critical.”
He added: “I’m not walking away into the sunset here. To me, this is the next chapter and next story of my career as well. And I’m extremely excited about this opportunity.”
Financial terms of the deal, expected to close in the second quarter, weren’t disclosed.
But as part of the deal, McLaughlin will become president of CRM for Orion and report to Clarke. In addition, McLaughlin will join Orion’s executive team and its board of directors.