Focus Financial Partners, the large, publicly listed RIA consolidator, agreed to acquire a Seattle firm with $3.8 billion in assets under management.
The acquisition of Badgley Phelps Wealth Managers, subject to regulation, is expected to close in the third quarter. Details of the transaction were not disclosed.
Steve Phelps, president, CEO and chief investment officer, said the partnership allows Badgley Phelps, a firm that has been around since 1966, to ensure its legacy without giving up control.
“This partnership also positions us for the next phase of our growth by providing access to a robust suite of new tools and services, especially Focus' trust and cash/credit solutions, to further our clients' success,” said Phelps in a statement. “We believe that becoming part of the large and diverse group of firms in the Focus partnership will yield many benefits to our business in the years to come."
Headquartered in Seattle, Badgley Phelps is a registered investment advisor catering to high-net-worth and ultra-high-net-worth individuals, families, corporations and foundations. The firm was founded by Walter Phelps and Charles Badgley and has lasted for 55 years.
Badgley Phelps is Focus’ fifth acquisition this year and its second in the month of June. Earlier this month, it announced it was acquiring ARS Wealth Management in St. Petersburg, Fla. Focus CEO and Chairman Rudy Adolf said the family-office structure of ARS helps it differentiate itself from others in the Florida market.
Following the news of the Badgley Phelps acquisition, New York City–based Focus subacquired another firm in Australia via its partner Connectus Wealth Advisers.
Connectus agreed to purchase George Ferizis Group in New South Wales. The transaction is expected to close in the third quarter, as well. Details of the transaction were not disclosed, and it is subject to closing conditions. AUM for the George Ferizis Group is not publicly available.
Focus’ latest acquisitions have been paid with cash from its balance sheet and cash flow, according to a spokesperson for the company. In July, the company will add a seven-year tranche worth $800 million to its term loan to prefund a series of transactions it expects to occur in the coming months.
“We will continue to prudently manage our balance sheet and maintain our targeted net leverage ratio range of 3.5x to 4.5x. In addition, our strong cash flow generation limits our reliance on debt as we grow our business, and we can use equity as acquisition consideration for select transactions,” said Focus’ Chief Financial Officer Jim Shanahan, in a statement.
Focus’ public stock has been on a gradual decline since private equity firm KKR sold its shares of Focus in a secondary stock offering. The stock is down 4.5 points or 8% from a high of $54.39 per share on June 21, the day before the KKR announcement, to $49.85 as of publication. The proceeds allowed KKR to exit its part of the investment it took in 2017 with Stone Point Capital. The two equity investors owned a 70% stake in Focus.
