In a transaction that creates the largest fee-only RIA firm in California's Marin County, Brouwer & Janachowski (B&J) has acquired Seton Smoke Capital Management. Terms of the deal were not disclosed.
The acquisition gives Tiburon, Calif.-based B&J, which manages about $700 million for 200 clients, another $300 million in assets and approximately another 160 clients. Seton Smoke's primary principal, Robert Smoke, plans to stay with B&J for at least five years. Seton Smoke will keep its office seven miles away in Greenbrae, Calif., given the cost and scarcity of Marin County real estate.
To build out its management team, B&J has named long-time advisor Rita Lee a principal of the firm. In addition, Jack Scaff III, a senior advisor at Seton Smoke, will become a B&J principal after the transaction closes. "We hope to bring in more shareholders," says CEO Kurt Brouwer, who sold a minority stake in B&J to Fiduciary Network in Dallas last year.
Both B&J and Seton Smoke are shareholders in National Advisors Trust Co. and had known each other since the mid-1980s, when fee-only RIA firms were rarities. B&J's 2007 sale of a minority interest in Fiduciary Network, which helped finance the deal, gave it an attractive, revalued currency with which to acquire Seton Smoke. "We wanted to bring in new shareholders in the past but we didn't have a currency," Brouwer explains. "Now the process is in place."
Robert Smoke, who founded his firm in 1983, says he had been approached by about 10 different potential acquirers over the last four years. "None of them seemed like a good fit," he says. "This does. It allows me to bring in a younger person as a shareholder. It's really hard to facilitate unless you are a larger firm with the capital to do it like Fiduciary Network."
Fiduciary Network is a holding company created by former Undiscovered Managers CEO Mark Hurley and New York investor Howard Milstein's Emigrant Savings Bank. Since its formation in 2007, it has acquired minority stakes in four firms, including Regent Atlantic of Chatham, N.J.; Evensky and Katz of Coral Gables, Fla.; and Brightworth of Atlanta. Hurley says he expects to see many more transactions like the B&J-Seton Smoke deal because the economics are very advantageous to both parties.
Smoke noted that the financial terms of the deal were relatively easy
to agree upon. Both firms share similar investment management styles,
they added, but merging the two firms while trying to retain a
consistent client experience proved to be a challenge. One firm does a
commentary, the other publishes a newsletter, and determining what type
of software and performance reports to use took several months to