Genstar purchases a sprawling RIA and BD compliance complex from Lovell Minnick to expand roll-up efforts

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The $ 33 billion private equity firm adds “$ 1 trillion” to Foreside Financial as a “signature” holding company and sees “secular GRC tailwind” in making compliance a broader outsourced service

Brooke’s Note: I woke up in Maine to a publication announcing this deal and sent a couple of emails to the public relations firm dealing with it. Both were ignored. I called a phone number when it posted … no answer. Then I realized that Foreside (being sold) is just a stone’s throw away from my temporary office in Portland, Maine for some reason. I went on foot. The office was closed – in the middle of the day – with a note on the glass door with information on Covid precautions. I took a picture. (See below). Even so, this seems like a remarkable deal as Genstar comes into play. It’s another area of ​​investment – the compliance machinery – where the size of Wall Street has been its greatest asset. It is now owned by Genstar, who have previously dealt with this type of compliance weed at Ascensus and various TAMPs. She undoubtedly has big plans to make a big success even bigger – even if many employees apparently still work from home.

Genstar Capital buys Foreside Financial after buying Orion and paying off Ascensus in a deal that incorporates the ardent enthusiasm of private equity sniper Tony Salewski.

The $ 33 billion San Francisco PE firm invested the sprawling compliance complex – which includes the RIA giant NCS Regulatory – from the hands of Lovell Minnick Partners, who turned their minority stake in the company into a majority stake in 2017.

Foreside’s Portland offices appear to be closed as a Covid precaution. (Brooke Southall photo.)

The deal is causing a stir because it continues to centralize a service company and turn it into an outsourcer that is known to be best managed in a decentralized manner, preferably on-site – namely, close monitoring of investment processes.

Foreside is a Portland, Maine, association of 17 limited broker-dealers and other compliance-related holdings. It was founded in 2005 and recently exceeded $ 1 trillion in distributed assets.

Genstar’s expects to complete the purchase in the third quarter of 2021. Financial terms of the transaction were not disclosed.

Signature transaction

Nevertheless, according to Salewski, Managing Director of Genstar, there is still a lot of upside potential in a press release. See: In a deal brokered by a ‘Tony Salewski’, Orion jumps to the top of the TAMP tier with $ 42 billion and more than $ 1 trillion in RIA portfolios

Brian Hamburger
Brian Hamburger: ‘The influx of private equity capital is not without its burdens.’

“Foreside is a signature Genstar transaction that represents an opportunity to invest in a high quality company in the asset and wealth management ecosystem, backed by compelling secular GRCs [governance, risk management and compliance] Tailwind. We look forward to this new partnership. “

Previously, the company leaned heavily on broker-dealers and mutual funds. Foreside acquired State Street’s chief compliance officer in 2010 and the fund distribution business of BNY Mellon in 2012.

Foreside caught the RIA’s attention in 2019 when it purchased NCS Regulatory Compliance, which at the time comprised 1,100 customers, 75 employees, and office locations in New York City, Londonderry, NH, Concord, NH, and Delray Beach, Florida. See: Lovell Minnick Invests More Capital in TurboTaxification of RIA Compliance Market With Roll-up of NCS; but Brian Hamburger and other freelancers see no threat

“The influx of private equity capital has not been without its encumbrances, most notably current or impending conflicts of interest,” said Brian Hamburger, president and CEO of Englewood, New Jersey, MarketCounsel in a 2019 RIABiz.

“The irony of this is that the really attractive investment opportunities are companies that don’t need private equity capital at all,” he said.

Strategic vision

Under Genstar, Foreside plans to expand its outsourcing to the service spectrum, according to Foreside CEO Richard Berthy, who will keep his management roles and a minority stake.

“We share a strategic vision to expand our current range of products and services, underscored by our belief that there continues to be a significant need in the market for outsourced fund and GRC services,” he said in a press release.

The company believes it has mastered the challenge with modern software.

“By using the latest technology, Foreside helps companies address and shape today’s regulatory environment, increase operational efficiency and growth, and focus on value-adding work,” it says.

We want to be very clear – first-class service for our customers is our top priority. With this support, we feel we can grow and grow our customer base while maintaining and maintaining this standard, “Berthy said in the press release.

Still, it’s more than a service issue. It is also an area where there is a lot of conflict.

“Certain industries are capital intensive and can benefit from this type of investment in a fast growing sector. I don’t think that professional services are part of it, ”explains Hamburger.


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