The Chicago-based roll-up sold '50-60%' stake -- for $350 million plus $100 million

February 10, 2018 — 12:40 AM UTC by Brooke Southall

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Brooke's Note: I wouldn't call this closing anticlimactic. HighTower has gone through the crucible of changing its business model and changing out its main investors all at once and from the outside it sometimes looked like nothing but pain. Still, you wondered why an investor like Thomas H. Lee Partners was jumping in if it was all that bad and if HighTower didn't have trick or two up its sleeve. Just enough information emerged as I reported this story to see how the dawning of a better day may yet be in the offing. Two big improvements post-deal are the harmonization of share classes and an upping of the advisor stake. A third is the removal of uncertainty around the CEO -- Elliot is sticking around. And what has gone well for HighTower of late -- the buying up of RIAs -- is poised to continue with $100 million now locked and loaded into the M&A cannon. See: HighTower hooks a 'rare' Miami catch of a JP Morgan Private Bank stripe at a crucial moment.

Thomas H. Lee Partners is now the owner of HighTower Advisors but the deal remains unannounced reflecting the unsettled nature of the company's advisors, staff and management. See: HighTower finds hundreds of millions to cash out itchy shareholders

The Boston-based private equity giant closed the deal to purchase the Chicago-based roll-up on Jan. 31 and now owns 50% to 60% of the total, according to the Securities and Exchange Commission.

The remaining 40% to 50% is owned by original investors like Dave Pottruck, Envestnet Inc., managers, staff and dozens of financial advisors.

The original deal was signed in late October.

New contract

HighTower CEO Elliot Weissbluth signed a new multiyear contract and remains on the board of directors, according to sources close to the deal.

Cashed out were four of the big institutional owners including AMF (Credit Suisse), Franklin Templeton, Macquarie Group Ltd. and Doug Brown, former chairman of Morgan Stanley, those sources say. A HighTower spokeswoman says Brown hasn’t sold his stake in the company. See: HighTower picks up $6.4-billion roll-up on the cheap but the valuation may reflect WealthTrust's stagnant growth and profitability.

Word trickled out through advisors and employees who were reportedly shocked at how little they were able to cash out their shares for. 

But what may keep advisors around HighTower is the structure of the new deal. 

For the first time, Hightower has only one class of shares for all constituencies. Advisors collectively now own a larger stake of the firm than they did prior to Jan. 31, say sources close to the deal. HighTower advisors were able to buy in or sell shares on the same terms as Thomas H. Lee Partners, the sources add.

HighTower manages $30 billion of assets, the SEC says. HighTower quoted a figure of $50 billion of advised assets back when it accepted the offer.

Neither Thomas H. Lee Partners nor HighTower issued press releases notifying the public that the deal had gone down.

Locked and loaded with $100M

The Boston firm paid $350 million, say sources who asked not to be identified. At the time the deal was first reported, Thomas H. Lee Partners pledged to invest an additional $100 million to building up HighTower. 

Sources confirm that the capital remains in the deal and that it is earmarked exclusively for making acquisitions. The company had already largely stopped recruiting wirehouse brokers in favor of buying RIAs or doing outsource-type deals associated with New York-based Dynasty Financial Partners LLC. See: Dynasty Financial wins its first Goldman Sachs team -- a Schwab RIA now with $1 billion of UHNW advised assets

Outside PR for Thomas H. Lee Partners acknowledged request for comment today by email then declined to comment.

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Spears Jeff said:

February 10, 2018 — 1:31 AM UTC

HighTower and Elliot are survivors. So is the independent RIA model which still needs to improve and evolve from a collection of brokers.

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