Kurt MacAlpine tells RIABiz in an exclusive interview how he managed to buy Europe's two biggest wealth managers, simultaneously, and integrate pre-closing without a penny of debt

The Canadian wunderkind who grew a U.S.-based RIA to near $150 billion (now $214 billion) mostly in two years is very much back with just two strokes of a pen – quicker, bigger and whiter-shoed – with zero debt.

Corient CEO Kurt MacAlpine, 44, told RIABiz in an exclusive interview that Corient entered the market from day one with a go-big-or-go-home philosophy.

“I always had a vision for globalizing Corient under the business model that we built or pioneered in the U.S.,” he said in the interview. “But again, I didn't want to do it in dabble, where I'm adding complexity. I wanted to do it properly.”

In fact, he says, he saw entering the market gradually as a distinct risk.

"Wealth Management is totally different [from asset management when it comes to scaling]. The connection point in our industry is the advisor-client dynamic. So scale itself is actually kind of irrelevant globally.

“It's incredibly important locally, right? So I think the biggest challenge that most firms face is they don't actually build enough relevant local scale to be able to become global. So I think that's the first issue, right?” he says. 

“So, when I think about scale, I think about scale in each local market. How do we get to a critical scale where we're adding strategic value for clients, we're not just accumulating complexity, right?

MacAlpine is going big with the right rationale, says Mark Tibergien, master consultant and former CEO of Pershing Advisor Solutions.

“Right on point,” he says in an emailed response to MacAlpine's take. 

World's largest

Corient issued one press release today (Sept. 3) to announce two acquisitions – Stonehage Fleming and Stanhope Capital, with $175 billion and $40 billion in administered assets, respectively. 

The price paid for the two-firm package was not disclosed. But one owner of Stonehage Fleming, Caledonia Investments, the London-listed investment trust, is selling its 37% stake for $387 million. That suggests the sale price for that unit is about $1 billion, The Financial Times reported. 

The deals now allow MacAlpine to stake a claim to being the dominant non-bank wealth manager in Europe on day one. See: Corient could become an RIA deal-making machine again and pursue its ever elusive IPO, after CI Financial moves to wipe out its debt -- now if it can only find a deal

Better yet, both firms have already been merged under the Corient brand and integrated as a single firm – made much easier by the fact that the firms have enormous overlap in clientele. 

Stanhope Capital largely uses Stonehage as its “family office.” The firms had attempted a merger on multiple occasions and used the Corient sale as a way to pull it off – doing the deal without shopping for other offers.

“With this expansion, Corient becomes the world’s largest independent advisory firm focused on the holistic needs of ultra-high-net-worth and high-net-worth clients,” said MacAlpine in the release.

Well-funded backing

What's more, Corient pulled off the deal without piling up debt. Its owner, Mubadala Capital, brims with cash and is willing to freely invest in the right wealth management deals. 

“Mubadala Capital paid for the deal with cash,” reads a statement provided by Corient to RIABiz.

"Corient spent nine months ensuring they could globalize their partnership model. There is no new equity per se. 

"Corient is just supported by a well-funded backer who believes in the strategy so much they're willing to fund it.  This is a perfect example of the strategic benefits of Corient's differentiated partnership model and Mubadala backing," the statement said. 

Trade-offs

Of course, going big requires big resolve and big piles of cash — something Mubadala is down with – particularly after watching Corient making trade-offs in the United States to stretch capital, MacAlpine told RIABiz.

“So their feedback was, 'We love what you're doing,'” he says. "We think that your capital priorities, between buying your shares back and building the US business, are going to create trade-offs for you.'

“So [Mubadal's view was, 'Let us partner with you; do exactly what you're doing. We want to help you jump to the end state so you don't have to buy any shares, and you can build the business exactly as you're doing.'"

"So that was the pitch. The pretty neat part about our take private and you've seen obviously, lots of take privates, no debt on the business. We actually injected equity to de-lever the business when it happened,” MacAlpine said. 

Global synergies

Once MacAlpine and Mubadala got on the same page with globalization, it was off to the races.

“So really, like, probably within weeks, maybe even two weeks after they knew there was an aspiration to globalize, I initiated conversations with [Stonehage and Stanhope],” MacAlpine said. 

Yes, local power is good, but global synergies would be even better, Trout says.

“Truly capitalizing on this deal will require more than fat margins. It will require development of trans-Atlantic synergies, most likely tied to the business interests of the client families and the firms' boards.”

MacAlpine says to expect global synergies. 

Clean referrals

“[Big banks] may have a business in London with the same structure, same business in Switzerland with the same structure,” he says. 

“So what that means is, you're adding offices, but if you're a client, you need to be a client of that particular institution in New York, a separate client in London, a separate client in Switzerland, let's just say

"But there's no actual collective benefit from being a client, aside from the same logo showing up on your statements.

"Corient will have the ability – unlike a global multinational bank – to refer business cleanly, because no individual has an incentive to hoard assets under the partnership incentive structure," he says. 

The partnership model is a key differentiator. Corient has about 260 partners today, a number that will rise to around 330 as a result of the deal.

"We also see Corient as the perfect home for our people, given its unique partnership model and commitment to collaboration and professionalism.” said Giuseppe Ciucci, executive chairman of Stonehage Fleming.

Balance-sheet health

Mubadala appears to be investing wisely, says Will Trout, senior researcher with Dato Insights who previously headed wealth management research for Celent from London.

"I see this as a diversification play, a step away from the cutthroat RIA business and a step toward serving the more rarefied – and price-inelastic -- needs of global capital. 

“In Stonehage Fleming and Stanhope Capital Group, Corient has acquired two of the glossiest of the UK-based white-shoe advisory firms, the former with roots serving expatriates from apartheid-era South Africa and the latter with a heavyweight board that includes former BP CEO John Browne.”

Such a low-leverage approach could be a big edge, says Tibergien. 

“Balance sheet health is also important," he says. "Fast-growing firms tend to outstrip their resources, so one wants to avoid a repeat of First Republic, which had a good wealth brand, and other names that were once prominent.  

"RIAs don’t tend to give weight to the balance sheet because they are not normally capital intensive. But international regulators do, primarily because this space is dominated by banks and brokerage firms.”

Not without obstacles

Yet, grabbing the mantle of world's largest doesn't come without risks, says Tibergien.

“The international market presents opportunities,” he says. "But as many generals have learned, it is dangerous to open too many fronts before consolidating your base. 

“To that point, none of the US consolidators have accomplished brand presence, full integration or market dominance, though the gap is closing.”

Tibergien adds: "International markets have a different regulatory regime and tend to be investment-centric. Markets like the UK also have more limited growth opportunities due to policies around Brexit, age and wealth demographics.  

"It is a good place to be, but it's not without obstacles."

“Size by itself does not connote brand presence.  Being one of the top three in the market you serve – either by defined client or by geography – needs to be a part of the equation.  And your emphasis on the local scale is key. Having an outpost is not the same as having a presence."

Serving global capital

Stonehage Fleming was formed in 2014, when the international family office merged with Fleming Family & Partners, the family office of Robert Fleming, a 19th century banking pioneer who made a fortune investing in U.S. railroads. 

Today, the firm manages money for some of the world’s most prominent families and wealth creators with more than 900 employees across 19 offices and 14 international boundaries, according to the firm. 

Stonehage Fleming named Stuart Parkinson as Group CEO in January. 

The Stanhope Capital Group already does business in the United States. It owns FWM Holdings in New York City, owner of FFT Wealth Management, an RIA to ultra-high-net-worth families in the United States and globally. 

As of Dec. 31, 2023, FFT had regulatory assets under management of $6 billion, which included $1.2 billion on a discretionary basis and $4.9 billion on a non-discretionary basis.

Sovereign wealth

The Mubadala cash is flowing to Corient’s global wealth management business via a new subsidiary of CI Financial Corp.’s parent company that will acquire Stonehage Fleming and Stanhope Capital. 

CI Financial spun off Corient after building it up to near its current size. See: CI Financial go-private deal removes Bain Capital's 14.5% PIK chokehold on Corient, CI's Miami-based RIA unit, but at the price of control

Mubadala Capital, manages a portion of Abu Dhabi's sovereign wealth fund. It took Corient private, cashed out Bain Capital, and provided a much-needed capital infusion – not least to plump Corient's M&A budget.