Adam Birenbaum's calls 'Colony' deal -- to create $100-billion super-RIA -- a 'mandate,' but it's also likely a 'prelude' to larger strategic objective, M&A expert says
The 46-year-old CEO of Buckingham Wealth's 'long game' approach keeps paying dividends; it comes down to his approach to relationships
7 min read
Brooke's Note: Adam Birenbaum said to RIABiz in 2010 that his plan was to grow his $12-billion RIA into $100 billion in about a decade. He was 32. “We’re going to bring a commercial element to an ideological business. We’re going to build and scale, so we can truly compete against the largest of the warehouses,” Birenbaum said at the time, in the RIABiz interview. See: Giant DFA customer puts young CEO in charge to execute ambitious national plan But here we are, a little over a decade later, and he is delivering on his promise and then some. Focus Financial has had its fair share of dark moments and some consider it a cautionary tale of what happens to roll ups that expect 100 RIAs with 100 ADVs to miraculously succeed with the loosest of ties. Adam and his Buckingham Cos. have been the shining exception to that rule. Kudos to Focus, Rudy Adolf, Michael Nathanson and CD&R for seeing, understanding and acting upon that. RIABiz also can take a small bow for naming him our ‘No. 1 Most Influential’ in 2012 over many better-known [back then] RIA stars.
The inmates now have almost total control over the asylum, but in this case that may be a very good thing.
Focus Financial Partners Inc. is putting Adam Birenbaum in charge of $115-billion of its AUM by merging his company, Buckingham Strategic Wealth, LLC (“Buckingham”) with its other mega-RIA, The Colony Group, LLC (“Colony”).
The result is a colossal “partner” firm – where the CEOs of those two RIAs control all decision-making.
Still, this deal should be viewed as yet another intermediate move as part of a grander financial engineering strategy, according to Mike Wunderli, managing director of ECHELON Partners.
“It’s very likely either the prelude to a [spin-off] sale [of Colony-Buckingham] or the formation of a super RIA rollup – which are not mutually exclusive,” he writes by email.
“Their combined size puts them in rare company among the Super RIAs. So, whether they are sold or stay with Focus, they’ll likely be an RIA consolidator going forward.”
Birenbaum confirms in an email that two of the three prongs of his strategy are M&A deal oriented.
“I believe there is a three-pronged approach to growth that is supercharged through this transformational merger,” says by LinkedIn message. "First, we simply have the opportunity to help our advisors grow even more (organically) with a game changing level of resources and solutions.
"Second, both Buckingham and Colony have a long track record of successful inorganic growth. This absolutely amplifies that.
“Third, I believe with this we are a very attractive solution for other Focus Partner Firms that someday require a succession solution or who simply embrace the idea of joining forces to be better together.”
The deal announcement, following Focus's semi-annual partners' meeting, technically reports that advanced discussions have taken place to have the two firms “enter into a definitive agreement.”
But it is already definitive enough that a full release was published today (May 6), and a closing is expected within two months.
Giant DFA customer puts young CEO in charge to execute ambitious national plan
Size Matters
It also answers the question about how Michael Nathanson, currently CEO of Colony and Focus, would manage the seeming conflict.
He won't. He is now solely CEO of Focus. See: Michael Nathanson's new post as Focus CEO could create an 'apparent conflict' with his duties at Colony Group, which is snapping up billions in Focus RIA assets -- but 'partners' now have one of theirs in the power seat
Certainly Birenbaum, 46, sees the merger as a first step.
"We have the distinct privilege and mandate to build something truly special, a firm that becomes a destination for exceptional talent in our industry and an advisor and client experience that is phenomenal. That is our north star.”
Nathanson also believes that size will matter in charting Buckingham's future, though the brand will be changed in due time.
“We cannot wait to see what Colony and Buckingham will accomplish when they join forces. Together, the combined firm will represent nearly 1,200 employees, more than 90 office locations, and tens of thousands of clients,” he said.
Widely respected
Birenbaum will also be CEO of Buckingham TAMP, Buckingham Strategic Partners, LLC (“BSP”). Jonathan Scheid will continue to serve as president of BSP, which will continue to file a separate ADV.
Story Timeline
The way it's all shaking out is unlikely to court controversy, according to Wunderli.
“This absolutely makes sense,” he says. “Nathanson can now focus on just being one CEO – and Focus is the right one between the two given his experience [asa president of Focus] and the firm’s lofty expectations of him.
"Adam is widely respected and has proven to be a great leader/manager of a multifaceted business (RIA + TAMP). He appears to be the perfect fit for this situation.”
He adds that it is a case of nice guys finishing first.
A look inside Focus Financial's big deal with The Colony Group
“Adam is a very likable, magnanimous guy. It seems everyone who meets and/or deals with him is immediately a big fan.” See: Michael Kitces and Adam Birenbaum are now on the same $50-billion Buckingham team after the blogger called the young CEO with a multi-pronged proposal
Buckingham is already a roll-up of sorts, with more than 40 M&A deals contributing to its growth --and Birenbaum himself can take much of the credit considering he took over as CEO at age 32.
What makes Birenbaum succeed is getting that “culture starts from the top,” says Michael Kitces, head of financial planning for Buckingham.
“Adam, he is a relationship-oriented leader who is incredibly patient to play the long game,” he says in an email. "So while markets, and the industry, go through gyrations and fads and FOMO in the short term, Adam's long term relationship focus, and the culture that brings to Buckingham as a whole, is what allows them to persevere over time.
“That's what attracted me to Adam and the Buckingham culture in the first place. Slow and steady wins the relationship race. (Not that Buckingham's growth pace was all THAT slow!”
Long-term vision
Focus Financial owners, who invested $7 billion to take Focus private, are betting that more power in the hands of its most proven "partners' will yield results.
“This transaction will create tremendous value and achieve increased alignment for Buckingham, Colony, and Focus through common equity ownership in Focus,” the release states.
“The aligned equity culture built through this combination is vital to the long-term vision and success of the combined wealth business.”
Though Focus has long made this sort of lofty proclamation, it's different this time, Wunderli says.
“The difference this time is that it is being led by a firm that has ample experience doing this type of engineering – CD&R [Clayton, Dubilier & Rice]. It has been non-stop since they acquired Focus.”
Rare company
Indeed, the combined RIA joins a short list of RIAs with more than $100 billion in AUM.
Those ranks include Mariner Wealth, Creative Planning, Edelman Financial Engines, Fisher Investments and Hightower Advisors.
The latter list leaves out the RIAs inside discount brokerages like Schwab, Vanguard and Fidelity. See: The RIA services of Vanguard, Schwab and Fidelity -- for two big reasons -- are cutting into RIA (and wirehouse) market share, Cerulli says
Buckingham Wealth is known to feast on its TAMP clients as M&A morsels. See: Buckingham becomes KKR-fueled, check-listed M&A 'machine' that now feeds on BAM TAMP clients
It added Loring Ward to that TAMP in 2018. See: Focus Financial buys $17 billion DFA TAMP for $235 million through its $3.6 billion DFA TAMP
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