Brooke’s Note: It was a big deal for the RIA business. Yet the planned combination of Advent Software and Black Diamond was not so large that investment bankers got called in to finance or advise on the transaction. What sufficed in place of Goldman Sachs, it turns out, was Charles Goldman. Here is a the story of how the former RIA chief at Schwab and Fidelity was asked to do a last-minute parachute into a deal where he knew all the people, the companies and the circumstances.

The deal clicked from the start.

It only took about three months for Advent Software and Black Diamond Performance Reporting to go from an initial February phone call between Hess, president of Advent Software, and Reed Colley, founder of Black Diamond, to a near-final deal between their two companies. See: Why Advent and Black Diamond are merging and how advisors look at the deal.

Niggling doubts

Yet even principals who quickly find common ground can experience niggling doubts when it comes to signing the papers that make things permanent. Reassurances from a trusted person can move matters along.

So, about a week before Advent and Black Diamond made official their plans to complete the $73 million merger, Hess called the Boulder, Colo., home office of Charles Goldman.

The former head of RIA custody units of Schwab Advisor Services and Fidelity Institutional Wealth Services missed the call but returned the message.

It turned out that Hess and his boss, Advent’s chairman and founder, Stephanie DiMarco, wanted a sounding board, Goldman says. (They had him sign a non-disclosure agreement before they revealed the Black Diamond name.)

“They said: Hey, help us think this through and give us your opinion. Is it a good deal? Is it a bad deal? What are the key levers and how do you think the market is going to react?”

Advent Software has a market capitalization of $1.4 billion, so a $73-million deal may not be make-or-break the company but no doubt the top executives want to get it right. Certainly they wanted to avoid doing anything that might trigger a negative reaction from fellow giants of the RIA business on the custodial side. Black Diamond has 280 firms that advise $75 billion of assets.

Taking great care

“We wanted to take great care to understand how this would affect the custodian parties,” Hess says.

Schwab, Fidelity, Pershing Advisor Solutions and TD Ameritrade have good relationships – including integration deals in many cases – with both Advent and Black Diamond.

Though Goldman says that the deal faces many challenges, he said that he was hot on it right from the start.

“I said: I think the deal is strategically brilliant,” he says.

But Goldman says that Advent is right to take special care to make sure that the custodians are comfortable with the merger.

He explained to the Advent and Black Diamond executives that the custodians are a de facto external sales force for all these technology providers and that they have deep relationships inside all the RIAs.

Right messaging

“I said (it was important that) the messaging and talking points were clear because the (relationship managers at the custodians) have to turn around and talk to their RIAs,” Goldman says.

Goldman has experience assessing strategic fits not only from his time at Schwab and Fidelity, but also in his previous career working for Boston Consulting. Even now, he is doing project work for Bain & Co. of New York, another major consultant to the industry. Advent paid him for his consulting work, including phone calls to Hess, DiMarco, Colley and Welling, both individually and as a group. See: Charles Goldman is seeking his game after tumult and a year of decompression.

Goldman has known Colley for five years, Dave Welling, Colley’s right-hand man at Black Diamond “forever” and DiMarco of Advent for several years.

The counsel of Goldman is appreciated, Welling says. “We need to prove out the strategy through flawless execution. We have the right vision and are on the right path and it’s very helpful to have the counsel of someone who knows this industry and advisors so well and can help keep us on course.”

Goldman sees Advent as a great company that “doesn’t have the best reputation” among RIAs; and he sees Black Diamond as disadvantaged as a “small company.”

Making a bet

“You make a bet when you go with a small company; I’d be worried about that,” he says. RIAs and custodians make a bet in the staying power and longevity when they purchase technology — a bet they lose if the company goes out of business because the software becomes obsolete without updates.

Advent — a proven survivor — will regain its momentum with RIAs if it has the mindset to bring out the best in both companies, according to Goldman.

“The execution (challenge) is taking the Black Diamond approach (to technology and service) and culture and bringing it to Advent and not the other way around.”

Advent has proclaimed in press releases and in interviews that it is going to channel its inner Black Diamond henceforth and let it take command of the RIA software effort.

This is not something that Advent has a history of doing, says Jim Alfred, vice president business development for National Advisors Trust Company, who has worked for both Advent and Black Diamond in senior sales roles.

Short autonomy?

“I know Peter and I know Stephanie, and they don’t let acquisitions act autonomously for very long,” he said.

The Black Diamond deal, he says, will be even more challenging for Advent than its 2008 deal for Tamale, a research management software provider, and others. In those cases, they were softwares that complemented Advent’s core software. Black Diamond is a direct competitor.

In Hess’ interview with RIABiz and in prepared remarks by DiMarco, Advent has already begun using Black Diamond’s mantra about its mission of making “great advisors.”

Some advisors aren’t buying that the Black Diamond goldfish can swallow the culture of the Advent whale at all and others say they are “cautiously optimistic.”

No Techfi repeat

Joel Bruckenstein, the Miramar, Fla.-based producer of the T3 conferences, says he doesn’t expect anything like a Techfi situation, where Advent purchased a hot web-based competitor to eliminate it as a threat.

Its incentive is to work cooperatively and humbly with Black Diamond because there are too many other competent competitors, including Orion, Albridge, Morningstar and Schwab PortfolioCenter, that are serving advisors effectively as outsourcers these days to make any buy-to-bury strategy viable. See: Advent Software is squandering its market leadership by keeping focus on Axys, according to a hedge fund analyst’s report

“This time the genie’s out of the bottle, and they can’t put it in,” Bruckenstein says.