Ken Fisher scores a scorching multiple from just announced private equity stake in Fisher Investments -- perhaps precisely because he kept private equity in its place
The founder, owner and chair of the $275-billion AUM firm continues a trend where top owner-operator RIA players are still in control.
4 min read- Fisher Investments secures high valuation due to founder-led control and organic growth.
- Private equity stake sale values Fisher Investments near $13 billion, surprising industry observers.
- Control retention by founders like Fisher may drive higher valuations in the RIA space.
Ken Fisher may now be living by two “PE” ratios – 20 and 20 – one is enviably high, one is enviably low, and they support each other.
The founder and chairman of Fisher Investments now has a 20% ratio of private equity [PE] investment to ownership in his company -- tiny by modern mega-RIA standards.
And he may have sold that stake for for a PE ratio of 20-times EBITDA (earnings before interest, taxes, depreciation, and amortization), according to two RIA industry observers.
Each source was contacted by RIABiz to help evaluate the $3-billion sale of the 20% minority stake in Fisher Investments that made news yesterday. See: Ken Fisher will reap staggering sum for small stake in deal that values Fisher Investments near $13 billion -- after denying nearly the same deal in January
Right in range
One source says he believes that Fisher's cash flow, or EBITDA, is likely in the $600 million to $700 million range. Fisher has not disclosed its earnings or cash flow.
Were that EBITDA amount of $600 million to $700 million correct, then the math based on the $12.5-billion valuation disclosed, suggests a multiple in the 20X range, surmises Mike Wunderli, managing director of ECHELON Partners by email.
“Fisher’s value is bolstered by a distinguished history,” he says.
Shirl Penney hands over 'front end of the house' to Andrew Marsh as Dynasty reboots -- post-$100-million raise, post-IPO withdrawal and post-Schwab partnering
Fisher's wealth management service charges 150 basis points on a typical $1 million account, according to its ADV. That amount can be even higher for accounts of less than $500,000 but also decreases on a sliding scale as accounts surpass $2 million.
Wealth rebound
The multiple apparently surprised Bloomberg, which noted today it had to double its estimate of Fisher's personal net worth, in light of the new multiple it is now applying to his remaining ownership.
Previously, Bloomberg estimated his net worth at just $5.2 billion. Apparently, it will soar past $10 billion and restore his standing as a Bloomberg Top 500 Billionaire.
He dropped off the list in 2022. Bloomberg explained that it applied a multiple based on three publicly traded wealth managers, but did not name them.
Control counts
Story Timeline
Fisher Investments likely attained its commanding valuation – in part – because of Ken Fisher's determination to hold on to control, says an industry executive who asked not to be named.
“It highlights the uniqueness of being able to back a founder lead business with founder still ther especially if founder maintains control and is passionate to keep going,” the executive says.
“Look at who is winning at highest level of space….Ken Fisher, Marty Bicknell, Peter Mallouk and Shirl Penney all still have control of the firms that they founded.*
Marty Bicknell grew to $100 billion AUM brick-by-brick, then -- boom -- added an AUA boulder, keeping Mariner Wealth in the AUA game with same-city rival Creative Planning
"The PE-controlled firms are not doing as well; interesting to look at. The [RIAs] with the strong balance sheets and stronger leaders are going to keep winning disproportionately here.
“I’d bet that Ken – because he understands what matters -- did not get a max trade in terms of multiple but got a max trade in terms of the terms --and thus why he mentioned common stock in the release.”
Organically grown
Indeed, the Fisher release mentions common stock in the headline of the release and in the body.
“The investment in common shares includes neither options nor non-common stock preferences and includes proportional voting to the investors' beneficial ownership.”
The unnamed source says another irony of Fisher's successful deal is that he hasn't relied on deals to get where he is.
“Organic growth is KING,” Investors will pay much more for it than inorganic M&A growth. Ken had demonstrated he can grow the right way."
This article inadvertently misquoted Mike Wunderli in a previous version by saying he knew the valuation multiple to be 20X. In fact he was simply responding to a cash flow figure that another source provided RIABiz and the total valuation provided by Fisher Investments. We regret the error.
*Marty Bicknell owns Mariner Wealth. See: Marty Bicknell grew to $100 billion AUM brick-by-brick, then -- boom -- added an AUA boulder, keeping Mariner Wealth in the AUA game with same-city rival Creative Planning
Peter Mallouk owns Creative Planning. See: Peter Mallouk is exploring new RIA custody vendor for his $300-billion firm, despite new Fidelity referral deal; this time around upstart brands are in the running
Shirl Penney owns the controlling share of Dynasty Financial – not an RIA but one that backs RIAs in a similar spirit. See: Shirl Penney hands over 'front end of the house' to Andrew Marsh as Dynasty reboots -- post-$100-million raise, post-IPO withdrawal and post-Schwab partnering
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