Boston Private Bank & Trust Company has agreed to buy Banyan Partners LLC for $60 million in cash and stock, the two firms said Wednesday. The size and scale of the transaction is the latest signal that merger and acquisition activity in the RIA universe is intensifying. Both Boston Private and Banyan have built themselves through acquisitions of RIAs, and the merger is expected to create another acquisition juggernaut that will accelerate consolidation in the fast-growing RIA world.
Banyan, based in Palm Beach Gardens, Fla., is an RIA firm with $4.3 billion in client assets. Boston Private’s own wealth management unit, with about $5 billion in assets, will be combined with Banyan under a new subsidiary.
Banyan founder CEO Peter Raimondi will lead the combined wealth management unit.
The purchase price works out to about nine times EBITDA, with 65 percent being paid in cash and 35 percent in stock of the publicly traded holding company, Boston Private Financial Holdings (BPFH). Additional future incentives could amount to $15 to $20 million, Boston Private executives said.
The deal is expected to close in the fourth quarter of this year.
Reached by phone, Raimondi declined to confirm how much he stands to make from the sale. Raimondi owns 25 percent to 50 percent of the firm, according to its ADV form. Other sources said they believed his personal stake was close to 25 percent. Temperance Partners, a private equity firm with a minority stake in Banyan, will be bought out in the deal.
The combined wealth management firm will operate under the Banyan name until the deal closes, Raimondi said, and will likely be renamed Boston Private Wealth Management after that. "It will be a new RIA [and] have the same look and feel under my leadership as Banyan has right now," he said. Each of the two separate wealth management units currently employs about 80 people.
Although he sold his firm, Raimondi ends up not only with a lot of cash and Boston Private stock in his pocket but is also running an RIA double the size of Banyan in the top tier of the advisory business. "It has the feel of a joint venture or reverse merger," he said.
Referring to Boston Private Financial Holdings CEO Clay Deutsch, Raimondi said that "it takes a brave man" to turn over a successful business to an outsider. "They've got to believe and trust I can handle and expand" the wealth management franchise.
The sale is not the first time Raimondi, a serial deal-maker, has sold an RIA firm. In 2006, he sold The Colony Group, which later became a partner firm of Focus Financial Partners and moved to Florida, saying he wanted to focus more on asset management. According to Financial Advisor's RIA survey, The Colony Group managed about $3.4 billion in assets at the end of 2013.
Raimondi founded Banyan Partners in 2006, adding seven acquisitions in the past five years. Those deals included several money management firms, adding to Banyan’s existing niche in equity and options management.
"What gives me comfort is that Banyan itself is a company assembled through the combination of some high-quality firms, and they have managed those integrations with extraordinary care" and enjoyed high retention rates in terms of clients and talent, Deutsch said on a conference call with analysts on Wednesday.
"My roots go back deep in Boston" where The Colony Group was founded, Raimondi added, "and I've always had great respect for Boston Private and Clay knew about The Colony Group."
Early in 2013, Banyan hired Scott Dell'Orfano as chief strategy officer and chief deal maker. Dell'Orfano had previously spent 22 years at Fidelity Institutional's RIA custody, rising to the position of executive vice president. "Peter respected the fact that I knew a lot of firms," Dell'Orfano told Financial Advisor last year.
Dell'Orfano said Banyan has spent the last 18 months talking with numerous RIA firms, while completing two transactions.One was Banyan's biggest acquisition, which occurred last year when it purchased Silver Bridge, the RIA arm of WilmerHale, a global law firm. At the time, Silver Bridge managed about $2 billion in assets.
Dell'Orfano maintains that neither Banyan nor the merged firm is positioning itself as a roll-up entity, so many of its conversations with RIA firms looking to cash out and keep doing business the same way as they always have didn't go very far. "Our desire is in creating a national RIA firm, but the vision was never a colection of separately run and managed affiliate firms," he said. Instead, Banyan's goal is to create a consistent client experience, so that a 55-year-old client with a $5 million portfolio and similar profiles who enters a Banyan office in Boston or San Francisco would receive advice and portfolio recommendations that are very similar.
Tom Manning, the interim CEO of Silver Bridge before the sale and now CIO of Banyan, said at the time that the ties between the giant global law firm and the RIA had become frayed. Even though the RIA arm had managed almost $3 billion in assets at one point, that represented less than 2 percent of WilmerHale's estimated $1 billion in revenues.
Banyan will add a “sophisticated asset allocation platform, and an alternatives offering that is further along than our internal capabilities,” Deutsch told analysts.