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After New York roll-up CEO Rudy Adolf completes bang-up road show that emboldened share-price leap, time is of the essence
July 20, 2018 — 9:58 PM UTC by Brooke Southall
Brooke's Note: Mark Tibergien in a recent speech in San Francisco made the audience gulp. The RIA business is only 30 years old, hence the vast, vast majority of these atomized, fragmented and otherwise decentralized businesses are still run by their founders. What the Pershing Advisor Services CEO did not say is that the business of cobbling deliberately self-lily-padded RIAs back together again is about half as old. Focus Financial was founded in 2005, United Capital in 2005 and HighTower Advisors in 2008. See: This generation of advisor aggregators puts the roll-up ghosts to bed, for now Combined they might have amassed $150 billion, soaking wet with bull-market inflated AUM. For RIAs, this middling success is good news/bad news. The good news is that it proves that financial advice really is best pedaled by a relatively small and independent firm. The bad news is that roll-ups are held out as one of the better models for creating successions and liquidity -- and many advisors are old enough to retire. So if Focus pulls off its IPO on Monday ahead of schedule and at a lofty valuation, it marks a milestone of sorts even if God knows what financial engineering shenanigans are going on in New York to make it a reality. Or whether a P/E ratio in the 18 range can possibly be sustained.
Focus Financial Partners' initial public offering (IPO) is locked, loaded and ready to take bids ahead of schedule.
The New York-based RIA roll-up's IPO is now set for as early as Monday, July 23, according to a published Marketwatch IPO schedule. Sources familiar with the IPO say it is likely Tuesday or Wednesday at the latest barring mishaps. "They have partners in city getting ready," said one New York-based source. A Nasdaq IPO listing has it set for July 26.
The whisper date to begin trading on Nasdaq was originally July 30 or 31.
KKR and Stone Point are expected to grab as much as $632 million in cash as part of the base IPO. Provisions for another $90 million to be raised are also in place, contingent on buyer demand. See: Focus Financial files for IPO to raise $100 million, with 'interesting' timing.
The earlier date is the second sign that things are -- if anything -- going better than hoped. The price leaped from a presumed "low-20s" amount to $35-$39 a share. See: Focus Financial IPO is on at $39 per share as KKR pushes giant share premium, with an eye on raking off an extra $532 million.
"If the bankers have full order books and everyone’s satisfied with the price, there’s no upside in waiting," says Matt Crow, president of Mercer Capital in Memphis, Tenn., who has no direct knowledge of the date but finds it unsurprising that it's being moved up.
"The S-1’s been out for two months, so there’s been more than adequate time for investor due diligence," he adds.
The last RIA-related IPOs came eight years ago.
Envestnet first traded on July 28, 2010, and LPL Financial followed on Nov. 18, 2010 with its own successful offering. Envestnet went public at $9 and now trades at $59.30. LPL went public at $34.71 and closed today at $68.60.
The only pure RIA IPO happened on July 1, 2013, when New York-based SilverCrest Asset Management went public at $11.59. It now trades at $17.10 and has 21.3 billion of managed assets, according to its ADV, but still has a market cap of just $226 million. See: How SilverCrest pulled off an IPO after a few speedbumps and why the decision is looking good.
If there is bad news in the Focus IPO, it's the fact that employees and the like may have to deal with delayed gratification. With only a 20% portion of the company being traded, they'll have to wait 180 days to cash out and then, sources say, additional provisions place restrictions on selling big blocks.
The very good news for the RIA M&A community is that the IPO will force Focus Financial to divulge data about its internal finances that is invaluable in charting a course forward, Crow says.
But he adds the IPO can hardly come soon enough.
"Time kills all deals," he says.
Mentioned in this article:
Top Executive: Jud Bergman
Focus Financial Partners, LLC
Top Executive: Rudy Adolf
Pershing Advisor Solutions
Top Executive: Mark Tibergien
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