More deals involving IBD advisors on the horizon as shift to fees makes combinations possible

January 25, 2011 — 3:16 PM UTC by Lisa Shidler


Peter J. Raimondi founded Palm Beach Gardens, Fla.-based asset management firm Banyan Partners three years ago with aspirations of growing into a national asset management firm with offices all over the country.

For about a year, he’s been looking for possible merger partners to ramp up the growth.

Apparently, word got around in the industry. Two weeks ago, Banyan closed on mergers with two different RIA firms in one fell swoop – one that happened via custodial connections in Florida and the other, with a hybrid advisor on the LPL Financial platform, that came about as the result of an electronic version of a cold call.

Mergers and acquisitions will continue to accelerate for the next three to five years particularly among middle-sized advisors who are eager to grow more quickly, said Charles “Chip” Roame, managing principal with Tiburon Strategic Advisors in Tiburon, Calif., in an e-mail.

He also predicts there will continue to be more mergers among IBD reps – one of the firms involved in the Banyan mergers was a hybrid firm that used LPL to custody assets – because as advisors move towards fee-only models, it becomes easier for these firms to merge with RIAs.

“Banyan Partners is a premier firm in the industry, and we’ve seen an acceleration of big firms thinking about merging,” agreed Michael Bilotta, managing director with Gladstone Associates, LLC LLC, an M&A consulting firm in Fort Washington, Pa.

See: M&A market for RIAs continues record pace: Second half looks even stronger and Fidelity races to develop M&A program ahead of looming merger boom.

Banyan, an asset management firm which offers wealth management services to its top clients, now has $1 billion in assets under management after its mergers with Weiss Capital Management, a Palm Beach Gardens, Fla.- asset manager with about $400 million in assets and Colonial Wealth Management, a Boston-based wealth management firm with about $100 million in assets. Before, the mergers, Banyan had more than $400 million in AUM.

Terms of the deals were not disclosed, though Raimondi said there was no external financing. Both former Weiss President Sharon Daniels and Jay Carroll, former president of Colonial Wealth Management, have become principals of Banyan. The combined firm will have offices in Boston, New York, Atlanta, Memphis, and Palm Beach Gardens and Naples, Fla.

Raimondi is on the lookout for other merger partners.

Sometimes an e-mail works better than a call

Banyan’s first merger came about through an unusual route. Carroll was looking for a way to grow his $100 million firm – -but couldn’t figure out how to do so without letting go of the rainmaking he loved.

Between quarterly client meetings with more than 100 clients and back office operations, there was no spare time to recruit new clients.

He sent Raimondi an e-mail to throw out the idea of a merger.

Raimondi nearly deleted it. But he had been in the market for merger partners for a year, and so he read it. The two men met last fall and began crafting a deal for Carroll’s firm to merge under Banyan Partners.

“I’m glad he e-mailed me,” Raimondi said. “Otherwise, I probably would have never gotten the call.”

Colonial’s 100 clients have an average net worth of about $3 to $5 million and most are investing about $1 million with Carroll.

“This will really provide a deeper bench in the investment management side,” Carroll said. “We’ll get freedom to source new clients and spend time with our existing clients. Now, we can concentrate on clients.”

Relationships built through Fidelity

The second RIA that Raimondi purchased this month is less than a mile from his office on Jog Road in Palm Beach Gardens, Fla.
Because Weiss and Banyan both custody assets with Boston-based Fidelity Institutional Wealth Services it was common for Raimondi to see Weiss’s President Sharon Daniels, 49, at advisory events in the state.

Weiss Capital, founded in 1983, specializes in niche tactical strategies and these are the types of strategies that Banyan currently doesn’t offer. Weiss has about 1,000 clients who invest about $400,000 with the firm but their clients’ average net worth ranges from $2 to $10 million.

Raimondi believes this merger will allow the company to woo Weiss clients to invest more of their money with Banyan.

Daniels said she likes the fact that the firm has a national presence. “We haven’t been able to sit face to face with many of our clients,” she said. “With the various branches at Banyan this will give us immediate opportunities to meet personally with more of our clients.”

In March, her office will move to the Banyan office down the road.

Building another firm

Raimondi, 55, built The Colony Group in Boston, a wealth management firm that he founded in 1986, but he decided to leave the firm because he wanted a company devoted mostly to investment management.

Raimondi, a Boston resident for 50 years, moved to Florida and officially rolled open his doors at Banyan on Jan. 1, 2008, with about $25 million in assets from former Colony clients that he knew for more than 20 years. He’s set the firm up as an asset management firm but for top clients he’ll offer some wealth management services.

For instance, he outsources tax work for longtime top clients who have complex tax issues that need to be solved.

“We are clearly an asset management firm with some wealth management components,” he said. “When you develop a real wealth management firm with all of the bells and whistles, it becomes really intense. You really need to be one or the other.”

Three companies becoming one

Now, the companies are in the process of becoming one big corporation. Weiss and Colonial already changed their companies’ names to Banyan. Banyan’s staff goes from 18 to 40.

Because Banyan works mostly with Fidelity Investments and TD Ameritrade, they moved Colonial’s assets away from LPL to Fidelity and TD Ameritrade. Banyan will manage the assets using its portfolio strategies.

Carroll said the custody change hasn’t impacted his clients.

“Our clients don’t care whose name is on the statement,” Carroll said. “They’re much more concerned about the portfolio management capabilities of Banyan.”

Raimondi, who is also an attorney, handled much of the two deals himself with help from the firm’s corporate counsel Duane Morris LLP of Philadelphia. But he didn’t use a merger and acquisition specialist. He’s handled mergers before. Shortly after he launched Banyan in 2008, he engineered the deal to buy New York-based Oaktree Asset Management on Jan. 1, 2009.

More growth is also in sight, he said.

“Getting to $1 billion is a stepping stone for us to be multi-billion – maybe $5 billion,” he said. “I will grow if I can find the right cultural fit to expand the service model.”

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