Mercer Advisors, a fast-growing wealth management firm, is losing one private equity partner and gaining another with today’s announcement that Oak Hill Capital has bought a stake in the firm.
Based In Denver, Mercer Advisors is the parent company of Mercer Global Advisors, a national registered investment advisor with more than $16.5 billion in client assets. As part of the company’s recapitalization, Oak Hill will acquire an equity stake in Mercer Advisors from current private equity owners Genstar Capital and Lovell Minnick Partners.
Genstar will remain a “significant” investor in Mercer Advisors, along with Oak Hill, says Dave Welling, CEO of Mercer Advisors.
“The exact percentages won’t be settled until closing,” he says. "They’ll both have a board seat.”
Lovell Minnick Partners will cash out its stake when the transaction is completed, which is expected sometime in the fourth quarter.
According to the publication Buyouts, Genstar this summer sought a buyer for Mercer Advisors and eyed a sales price based on a multiple of 15 to 16 times its pro-forma, run-rate Ebitda of $50 million. That equates to a price of roughly $750 million. Deal terms of the recapitalization involving Oak Hill weren’t disclosed, and Welling declined to comment on the details.
The cash infusion from Oak Hill is expected to expand Mercer Advisors' client offerings and its recent acquisition push. The new ownership structure is part of the firm’s evolution since it was founded as a one-man shop in 1985 by Kendrick Mercer. He eventually sold the business to four partners, and in 2008 Mercer Advisors got its first private equity backer when Lovell Minnick Partners bought a majority interest in the firm.
In 2015, Genstar bought out Lovell Minnick Partners and became the majority shareholder of Mercer Advisors. At the time, Mercer Advisors had roughly $6 billion in client assets, 140 employees and 15 branch offices across the country.
In 2016, Mercer Advisors merged with Kanaly Trust, which was owned by Lovell Minnick Partners. The Kanaly deal, which brought Lovell Minnick Partners back on board as a minority owner, was the start of Mercer Advisors’ acquisition binge of wealth management firms that has propelled it to its current size of more than $16.5 billion in client assets, 370 employees and 44 offices across the U.S.
Welling says that roughly two-thirds of Mercer Advisors’ growth during the past three-and-half years has come through M&A activity, with the rest via organic growth.
He notes that in addition to growing its asset base, headcount and national footprint in recent years, Mercer Advisors has broadened its skill set for clients by expanding its investment offerings and beefing up personnel in the areas of estate planning and tax planning.
The company has also built its referral relationships with Charles Schwab, E*TRADE, Fidelity Investments and TD Ameritrade.
Regarding Mercer Advisors’ private equity partners, Genstar owns a majority stake in Cetera Financial Group’s independent broker-dealer network, and has other investments in the wealth management space. Oak Hill’s broad investment portfolio includes Edelman Financial Engines, which resulted from a merger between Financial Engines, an online investment advice firm co-founded by Nobel Prize winning economist William Sharpe, and Edelman Financial Services, which was co-founded by noted financial planner Ric Edelman.
Mercer Advisors’ recapitalization involving Oak Hill raises speculation about its long-term plans, perhaps including going public. But Welling isn’t fueling any speculation at this point.
“We’ve been very happy with our private equity ownership and the owners that we’ve picked,” he says. “We apply a very rigorous process in who we align with. We’re focused on the next client regardless of the ownership structure, so we’ll just take one leg of the journey at a time.”