EP Wealth Advisors, an acquisitive Torrance, Calif.-based registered investment advisor with nearly $40 billion in assets under management, has signed an agreement with Ares Management for the private equity firm to acquire a significant minority stake in the firm. Ares invests alongside Berkshire Partners, EP’s existing minority equity partner.
Terms of the deal, expected to close next month, were not disclosed.
Once the deal is complete, Ares, Berkshire and EP’s management will hold three non-majority, non-controlling positions in the RIA, meaning management will retain control over the company and its board of managers, said CEO Ryan Parker. Co-founders Derek Holman and Brian Parker (no relation to Ryan) will maintain meaningful ownership in the firm and continue in their current roles.
This follows news from last week that EP issued a $400 million, seven-year term loan and a $100 million, five-year revolving credit facility, and received credit ratings from S&P Global Ratings and Moody’s.
“We’ve been growing quickly both organically and inorganically for well over a decade, and we thought this was an important juncture to bring on a second minority investor, alongside Berkshire Partners, who’s been a great partner of ours,” Ryan Parker said in an interview with WealthManagement.com. “And that, combined with the announcement that came last week for the broadly syndicated loan market, we just think puts us in a position to have a lot of strength going into the next stage of growth.
“The S&P and Moody’s ratings that came out and others show that we have reached the scale where this type of capital markets position makes the most sense for the overall organization.”
EP has also been minority-backed by RIA investor Wealth Partners Capital Group since 2017. But the firm owns individual holdings of EP, not an institutional fund position, and Parker declined to comment on individual holdings.
He said EP chose to partner with Ares because its team shared its vision and respected the firm’s focus on clients and management control of the board.
“Beyond that, they bring resources—resources that will help us both accelerate our growth and make sure that growth is accelerated in a healthy and sustainable way,” he said.
A portion of the capital will be used to provide liquidity in the secondary markets. They will repurchase shares from employees who will be retiring over the next 12 months or so, and provide partial liquidity to longer-term shareholders. None of the key stakeholders will be leaving or retiring as part of the transaction.
Another portion of the capital will go onto the balance sheet as primary, supporting EP’s organic and inorganic growth. The RIA has completed eight deals this year, the most recent being with Santa Fe, N.M.-based Better Money Decisions, which has $370 million in AUM. The RIA now has 54 offices in 19 states and 200 advisors.
The firm is on track to complete additional M&A deals this year, as part of its talent-led M&A strategy.
“What we’re looking for are those fee-only fiduciaries, those entrepreneurs who want to continue to grow and, as part of a partnership, they want to be able to grow faster and offer their current clients even more services while we help collectively find additional clients,” Parker said. “Those types of alignment for long-term value, we’ve seen now over 50 times, that is the set of attributes that is much predictive of success than us having a more geographically-led strategy.”
EP Wealth was founded in 1999 by Holman and Brian Parker, who were childhood friends. It was originally launched as Premier Financial Management before rebranding to EP Wealth after a 2004 merger.
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