After months of speculation, Advisor Group confirmed today that Reverence Capital Partners has acquired a majority stake in the independent broker-dealer network.
Lightyear Capital, which had acquired a controlling interest in Advisor Group from AIG for about $400 million in 2016 with PSP Investments and other shareholders, will retain a minority of about 25 percent. No purchase price was disclosed but investment banking sources estimated that the price Reverence paid valued Advisor Group at between $2.1 billion and $2.3 billion. That translates into a significant premium for an IBD network with $1.7 billion in revenues and more than 7,000 reps.
The transaction leaves Advisor Group and its four independent broker-dealers as a standalone entity. Back in January, it was reported that Lighyear had talked with Genstar, which paid $1.74 billion for Cetera Financial Group in September 2018, about merging the two IBD networks.
Jamie Price will continue to serve as CEO of Advisor Group. Valerie Brown, Advisor Group's executive chairman, will retire from her executive position but she will remain an investor.
Price acknowledged that the IBD space was changing dramatically as millions of baby boomers enter retirement. “We are in the early innings of the fiduciary era, we have a nice lead and we plan on winning,” he said. “And winning in our book is our ability to continue to make significant investments in our business to give our advisors the technology, service and products they need to serve their clients in this fiduciary era and position their businesses for long-term success and growth. This transaction, which aligns Advisor Group with well-resourced financial partners, accomplishes just that, to the benefit of the financial advisors we’re privileged to serve.”
Price also noted that the investment by Reverence is yet another example of "smart" private equity firms' interest in capitalizing on the retirement boom in America. These investors see retirement assets growing at a rate of three times GDP. Both the IBD and RIA formats are expanding at a much faster pace than banks and wirehouses.
Since it was acquired by Lightyear in 2016, Advisor Group has grown from 5,200 advisors to more than 7,000. In that period, Advisor Group has climbed from the fifth biggest network to the third largest.
Its four BD's—Royal Alliance, Sagepoint Financial, FSC Securities and Woodbury Financial Services—have performed in the current bull market. Client assets under administration stand at $268 billion, up from $190 billion at the end of 2017.
The transaction also establishes Reverence Capital as a major player in retail financial services. “Reverence Capital is investing in a strong and experienced management team. We look forward to working closely with them every step of the way,” said Milton Berlinski, co-founder and managing partner of Reverence Capital.
Over 25 years at Goldman Sachs, Berlinski created and built the largest financial services investment banking group on Wall Street. He noted that the IBD space is seen as increasingly attractive to private equity firms.