Focus Financial Partners, one of the advisory industry's most aggressive aggregators, has added $400 million in capital funding, with another $150 million waiting in the wings, scoring one of the industry's largest lending deals from a consortium of large banks.
The funding, nearly double in size from an earlier line of credit that was closed in 2012, represents a major vote of confidence in Focus, according to industry experts.
"To my knowledge, this is an unprecedented amount for a consolidator targeting independent wealth managers," says David DeVoe, managing partner of DeVoe & Co., an investment banking and consulting firm based in San Francisco. "It's a big number, and an opportunity for Focus to grow through mergers and acquisitions, sub-acquisitions and succession planning."
"This is impressive just from the absolute dollar amount of the funding and the diversity of the capital providers," adds RIA industry consultant John Furey, principal of Advisor Growth Strategies in Phoenix. "It is a massive vote of confidence in Focus Financial. And its a vote of confidence for the RIA channel, in general, given the financial participants."
The credit will be available to all of Focus' 27 partners, who manage nearly $70 billion in combined assets, and will be used to finance transactions by both the holding company and partner firms for mergers as well as succession planning, according to Focus founder and CEO Rudy Adolf. "This is a signal to the market that we have the firepower that we're interested in deploying in line with our business model," Adolf says.
The increased debt can be a double-edged sword, DeVoe says.
"When you take on debt, you can provide shareholders with greater returns because you are raising money without diluting the shareholder base," he explains. "However, organizations that don't manage their capital structure well or run into difficulties can be put in challenging position down the road."
The bank consortium for the new credit facility includes Bank of America, SunTrust Robinson Humphrey, The Bank of Tokyo Mitsubishi, UFJ, J.P. Morgan, Fifth Third Bank, U.S. Bank, Huntington Bank, Comerica Bank and TriState Capital Bank.
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