Focus Financial Partners has confidentially filed for an initial public offering, according to reports.
In Sunday’s Wall Street Journal, unnamed sources told reporters that the firm was working with Bank of America and Goldman Sachs on the offering, adding that the IPO could value the firm at $1 billion.
A source who did not wish to be named told Financial Advisor that the IPO was “filed under a crowdsourcing provision in Dodd-Frank that allows [firms] to submit information to the SEC for review but not have to show it to the public until [they] are relatively certain [they] can get the deal done,” as long as the firms generate less than $1 billion in annual revenue.
Earlier this month, New York-based Focus Financial announced that it has almost $400 million in annual revenue in a press release. Focus was founded in 2006 by former McKinsey & Co. partner Rudy Adolf.
Focus Financial started out by purchasing majority equity interests in independent RIA firms. More recently it has specialized in helping brokers break away from Wall Street banks to operate independently. The firm has majority interests in several leading RIA firms including the Boston-based Colony Group, St. Louis-based Buckingham Asset Management,Douglas C. Lane & Associates and Flynn Family Office, both in New York City, and LLBH Private Asset Management in Westport, Conn.
Last summer, it was reported that Focus Financial was preparing to file an S-1 document with the SEC, a precursor to an IPO.
According to a source, prior attempts to take Focus public have not succeeded as the climate in the IPO market has been volatile, with most of the interest revolving around high-growth areas like bio-pharma, e-commerce and social media. In contrast, the RIA industry, though it is expanding, doesn't possess the glamour of most IPOs.
Success this time depends on the forward-looking multiple of earnings, sources said. “The market does not care what your current earnings before interest, taxes, depreciation and amortization (EBITDA) is, only what you’ll make in the future. If the market doesn’t believe that earnings will grow at a high rate, the multiple tanks and the entire plan collapses.”
If the IPO is successful, Focus Financial will receive additional capital and currency to accelerate its acquisitions of RIA firms.
Focus's private equity backers include venture capital firms Summit Partners and Polaris Venture Partners, as well as Centerbridge Partners, a private equity firm that made a $216 million investment in 2013.