The private equity recapitalization of a firm that has emerged in recent years as one of the most active and fastest growing RIA consolidators gave the company a multibillion-dollar valuation.
A PE fund affiliated with publicly traded investment manager Onex Corporation paid $226 million for “economic ownership” of 11% of Wealth Enhancement Group,
Representatives for Wealth Enhancement Group declined requests for comment on the first disclosure of the deal’s terms since
A team led by Managing Director Todd Clegg has been studying the U.S. wealth management industry “for the better part of three years and we’re patient to find the right one, and we think we have the right one,” Onex President Bobby Le Blanc told analysts. There are no signs that Wealth Enhancement’s organic growth or M&A transaction volume is slowing down, as the firm’s practices tend to serve clients with around $1 million to $5 million in investable assets, Le Blanc said.
“They serve sort of the lower end of the wealth management market,” he said. “There’s plenty of people in that category and plenty of businesses to roll up.”
The high valuations of RIAs are helping to drive the record volume of M&A transactions, which are on pace to set a record for the ninth straight year. Minneapolis-based Wealth Enhancement has topped $52 billion in client assets after reaching 13 deals in 2021, including the
The investment in Wealth Enhancement by Onex’s private equity arm was the second-largest deal of the period in terms of the seller’s client assets and “one of the most significant transactions by a private equity firm this quarter,” according to Echelon’s deal report. Wealth Enhancement has grown to more than five times the client assets it managed in 2019.
“Wealth Enhancement Group has been one of the most active strategic acquirers in the space so far this year, and the capital infusion from Onex will recapitalize the M&A warchest and provide them the funds necessary to continue their rapid buying streak,” the report said.
In addition to being on pace for 287 transactions across wealth management in 2021, the average client assets of firms changing hands has reached a record $2.32 billion. The high valuations and sheer volume of deals have prompted more “buy-versus-build” discussions inside the wirehouses, independent brokerages, insurers, retirement firms and other large institutions working with consulting firm Accenture, according to Scott Reddel, a managing director who leads the firm’s North America Wealth Management unit.
“We're reaching a bit of an inflection point,” Reddel said. “As clients are growing into new segments or new offerings and they choose to do it organically, there's still an element of filling in the gap of their offering.”
The value of Wealth Enhancement in the deal with Onex and TA, a firm that has backed the
“Wealth Enhancement Group has established a leading national wealth management platform with a client-centric approach and a culture of striving for continuous improvement in everything the firm does, which has driven positive outcomes for clients and the business,” Clegg, the Onex managing director, said in a statement when the deal was announced this summer. “We're confident that WEG remains uniquely well-positioned to keep growing, both organically and by continuing its track record of well-executed acquisitions."
Seven financial services portfolio firms comprise 27% of Onex’s gross PE capital, at $1.50 billion out of a total of $5.62 billion, according to the firm’s supplemental earnings disclosure. It has spent more than a third of its PE capital on a dozen firms in the services industry, with other investments in 12 industrial companies, seven consumer and retail firms and four healthcare companies. With a track record of 37 years, Onex has completed about 740 acquisitions with a combined value of $101 billion. In 2021, its PE investments generated a 25% gross return after deploying $2.7 billion and receiving $3 billion of realizations and distributions. In the first nine months of 2021, Onex has spent and generated more PE capital than the entire previous year.
Another firm that came into the firm’s portfolio in November 2020, Atlanta-based health, retirement and wealth firm OneDigital, made the
