Mariner Wealth Advisors brushed aside a host of competitive bids to absorb Cincinnati-based RiverPoint -- a rare jewel for its size, quality and availability
Brooke’s Note: Marty Bicknell doesn’t have a swanky office in New York, Los Angeles or Chicago, a band of private-equity guys behind him from a trendy boutique. He’s not even labeled a “roll-up.” It’s just that he’s on a roll. Bicknell previously built his wealth management firm to about $5 billion (never mind the $11 billion of asset managers) doing niche, opportunistic deals. But this time he went mano-a-mano for a plum RIA against, the whispers say, some very capable, seasoned buyers. He came out on top. Here’s what we know.
Marty Bicknell is on the march with big assets, a (still) low profile and a new trove of assets from the world capital of shampoo.
The 44-year-old CEO of Mariner Wealth Holdings of Leawood, Kan. may have pulled off his most impressive deal yet by going toe to toe with buyers nationally to win the hand of RiverPoint Capital Management. Not only does the acquired firm manage $1.3 billion of assets but it has a plum, underserved market in Cincinnati. The small city produces big wealth with companies like Kroger, Procter & Gamble and General Electric calling it home — not to mention plenty of entrepreneurs. RiverPoint’s prototypical clients has $3 million to $5 million.
Bicknell says he intends to announce another deal in December. The giant Leawood, Kansas-based Mariner Wealth Advisors led by Bicknell has been on a mini-buying spree of wealth management firms and this purchase is the firm’s third deal this year. See: Mariner Wealth Advisors buys a $1.3 billion wealth manager that first unwound its ties to a bank.
Finesse, not flash
Mariner apparently did more finessing than cash-flashing this time around as various sources say that it wasn’t even the high bidder. Instead it demonstrated that it’s a good star to hitch to for succession and growth, according to RiverPoint’s chairman and managing director, Valerie Newell.
“We are strong business people and we’ve had a lot of success,” she says. “We want to continue to do what we’ve done.”
Certainly Bicknell, the scion of a entrepreneurial family that once owned the largest Pizza Hut franchise in the nation, has a track record of growth and dizzying momentum on his side. He has gone from being a breakaway broker from A.G. Edwards in 2006 with $300 million and three partners to a national company with closer to 300 employees today. With this new deal closed last week, the corporation now has $17 billion in assets with $11 billion on the investment management side and about $6.2 billion on the wealth management side.
Though parties to this article balked a bit when the term “auction” (a term associated with estate sales and bankruptcy) was tossed into conversation, the word describes, in essence, how a buyer, despite no morbidity, was chosen in this case. See: Focus Financial VC backer says IPO still on the table after private auction yields no sale.
Tough luck on auction-hating buyers
The auction was a natural choice for RiverPoint, according to Steve Levitt, managing director and co-founder of Park Sutton Advisors LLC of New York who advised the deal.
“The buyers hate the idea of auctions and claim they won’t participate,” he says. “If you are a seller, the only way to go is to have a competitive process. Whether you want to call it an auction or something else, you need a competitive process. It’s hard from the sellers perspective to make a decision until you’re able to stack up options and decide what are the top priorities.”
There were a number of bidders eager to get ownership of RiverPoint, Levitt says.
“I’ve been doing this for 16 years this was one of the most successful ones we’ve done. We got astounding interest. It was very competitive. A lot of people wanted this firm. It was a great target.”
David Selig, principal of Advice Dynamics, says this is a common process that many M&A firms encourage advisors to follow. See: RIA M&A activity sizzles toward a record number of deals in 2010.
“It sounds like RiverPoint followed a sound offering process where the advisors developed offering documentation that was circulated to known buyers,” he says. “This allows many sellers to shop around to other folks they hadn’t met before.”
RIA deal boon
John Furey, principal of Advisor Growth Strategies, LLC LLC, acknowledges that most buyers don’t like a competitive bidding process, but says that the number of participants in this deal confirms how attractive these giant $1 billion RIAs are to other firms.
“To me, [the multitude of bidders] validates that once a large firm gets to a certain level such as $1 billion they are appealing to many others,” he says. “The firm had choices and it’s interesting that they didn’t sell to a strategic acquirer such as a roll-up or a bank.” See: Why the term 'roll-up’ should stay in the RIA vocabulary.
There are fewer than 400 RIAs with $1 billion or more in assets and most of them aren’t interested in selling, he adds.
“These firms just don’t go up for sale very often because the owners typically have a bias for not selling and they want to retain or build their own business,” he says. “It seems this combination was made for strategic reasons and money and terms aren’t everything. It’s about what is best for the selling owners and the employees. Sometimes, we get caught up in price and terms in the present state, but it’s about the future.”
Best of class
RiverPoint was appealing to many other firms for a number of reasons including the fact that the RIA has strong growth and has created a well-known brand name in Cincinnati, an under-served market, Levitt says.
“They really had a very strong organic amount of net new asset growth for many years and they have a strong market presence,” he says. “This shows that buyers are interested and will pay competitively for best in class properties. It’s more challenging if you’re a wealth management firm and you don’t have strong net new asset growth.”
Mark Hurley, president and CEO of Fiduciary Network, says this was a good deal and points out that Cincinnati is a great place for an RIA. “It’s good people and it’s a great market.”
Millionaires next door
While Cincinnati is not known for its wealth, giant firms such as Proctor and Gamble, Kroger and GE have large divisions there.
“The secret sauce in Cincinnati is the private companies, the entrepreneurs and the millionaires next door,” Newell says. “It’s such a wonderful people to work with and they all have very realistic lifestyles. They’ve saved a ton of money and have lived very financially responsible lives.”
RiverPoint will keep Schwab Advisor Services as its primary custodian. The firm also keeps substantial assets with U.S. Bank’s trust department.
Mariner is a fast-growing, high-profile RIA that’s part of Mariner Holdings, which also includes Montage Asset Management. The latter has produced some hot fixed-income closed-end funds under the Tortoise Capital Advisors brand that fellow advisors snapped up in search of yield last year.
Mariner sets itself apart with its ambitions and its willingness to execute them, according to Steve Austin, spokesman for Fidelity Institutional Wealth Services, the firm’s custodian in an earlier interview.
“So many firms talk about the desire to acquire. Marty and his team have clearly emerged as leaders in the acquisition space, and they have done so while truly embracing and serving the dually registered advisor,” he says.
RiverPoint Capital Management has staff of 17, and was founded more than a decade ago by Newell and Leon H. Loewenstine, managing director and chief investment strategist. Both Lowenstine and Newell will continue to run RiverPoint and the firm’s name won’t change. The RIA has more than 300 clients and its average client has about $3 million in assets.
The deal created a succession plan for RiverPoint and allowed the firm to promote three senior portfolio managers who were also able to gain ownership status of RiverPoint. Portfolio managers Pamela Schmitt, Tony Roberts and Ryan Brown were named managing directors of the firm. In addition, Newell and Loewenstine also maintain ownership of RiverPoint.
Mariner now owns the majority stake of RiverPoint and executives at both firms declined to list the details of the deal.
Newell says she doesn’t consider the process an auction necessarily but says her firm wanted to use a process that would allow it to find the best partner.
“We want to expand our resources and that’s what this review was all about. We wanted to make sure we can find a firm that would help us be successful. We are strong business people and we’ve had a lot of success,” she says.
Newell feels the review process was excellent because it allowed her firm to meet with executives across the country.
“We really wanted to know that we had explored all of the different alternatives that we should explore and to see what is the best option,” she says. “That’s how I feel about Marty and the Mariner team. They’re absolutely the best partner for us.”
Sink or swimmer
Prior to joining RiverPoint in 2002, Newell was a managing director of Scudder, Stevens & Clark Private Investment Counsel and director of the Cincinnati Office. Scudder, prior to its purchase by Deutsche Bank, was a long-standing independent investment advisor with national and international operations. Newell spent 12 years at Scudder, where she specialized in the management of investment assets for wealthy individuals and their families. She received a Bachelor of Business Administration degree graduating Magna Cum Laude from Bowling Green State University where she was a two-time All-American swimmer.
Bicknell feels the firms can meld well together.
“We can partner with them for the HR, payroll, finance and compliance and all of those issues so that they can return to work with clients. I like the fact that they have high retention of clients and employees. When I sit down with them, the most important thing is clients.” See: On its march to $50 billion, Mariner finds its groove buying RIAs connected to accounting firms.