Focus Financial Partners’ pockets just got a lot deeper. A consortium of banks approved a credit facility of up to $320 million for the New York City-based registered investment advisor aggregator, almost double the size of its previous facility of $155 million. Focus plans to use the money to buy more—and larger—advisor firms and to expand its service offerings to those advisors already on board.
“Now we can do more (deals) at a significantly lower cost of capital which, quite frankly, makes deals very, very attractive,” Focus founder and Chief Executive Rudy Adolf told Registered Rep. “We feel very good about the pipeline and momentum in 2012. We see a significant increase of inquiries from leading wirehouse teams that are basically saying, ‘I really want to go to independent, I want to move to a fiduciary business model.’ ”
Last year Focus completed eight deals, including its acquisition of The Colony Group of Boston with assets under management of $1.3 billion. It also recruited Lori Van Dusen of the Rochester, N.Y. area from Convergent Wealth Advisors, and Sapient Private Wealth Management of Eugene, Ore., a practice of three former Morgan Stanley Smith Barney advisors with more than $500 million in assets. Founded in 2006, Focus has 23 firms and more than $45 billion in client assets.
Dan Inveen, principal and director of research at FA Insight in Tacoma, Wash., says Focus’ new line of credit could finance 25 to 30 more deals. “That’s quite a war chest for making some acquisitions,” he says. “The whole business model is based on growth. … You hear rumblings that capital is coming back into the mergers and acquisition marketplace in the wealth management space.”
Focus Chief Financial Officer James Shanahan says the new lending deal is for $220 million but can be expanded by $100 million. The lenders behind the credit facility include Bank of America, BMO Capital Markets, J.P. Morgan, SunTrust Robinson Humphrey, Comerica and UBS. SunTrust and J.P. Morgan are new lenders to the facility, Shanahan says.
Alois Pirker, an analyst with Aite Group, said a lot of banks are sitting on cash that they want to put to use. For rollup companies looking to expand, lines of credit are critical. “The main goal is to be flexible in doing acquisitions,” Pirker says. “Time is of the essence. When you do that, being able to pull the trigger can make all the difference.”