And as this article is being written, several RIA firms are in negotiations to buy themselves back from other acquirers. In previous interviews, officials at NFP, which has acquired more firms than any other consolidator, have said they have sold at least ten firms back to the original owners. Not every marriage works out, particularly in this individualistic world.
Sources said Focus had about $175 million in debt and $80 million in preferred stock, adding that Goldman told potential acquirers Summit was unwilling to take less than 10 times EBITDA, though it was unclear whether that figure included just Focus's $22 million or the $40 million total for both Focus and its affiliated advisors.
If it were the former figure, there would be little or no funds left for common shareholders, including advisors affiliated with Focus. Any acquirer then would need to renegotiate a new deal with those advisors or find another way to deal with its new business partners. But if it were the latter figure, advisors who sold majority stakes in their firms to Focus might be sitting pretty.
Still, sources thought there might be few takers if Summit holds out for the higher selling price. Six years after its initial investment, Summit, like other private equity firms, typically is trying to place a value on the business while looking for an exit strategy. But Focus, like many private equity ventures, has proved to be neither a roaring success nor a resounding failure, as the 2008-2009 financial crisis unquestionably upended financial projections conceived back in 2006.
The upshot is that, like other consolidators and their acquirees, Summit, Focus management, and their affiliated advisors could find themselves together for longer than they expected without a liquidity event. As Humphrey Bogart said to Claude Rains at the end of Casablanca, "This is the beginning of a beautiful friendship." That IPO at the end of the rainbow remains distant.