HighTower Advisors, a registered investment advisor consolidator based in Chicago, said Tuesday that it has made an investment in Lexington, Mass.-based RIA Lexington Wealth Management.
Terms of the deal were not disclosed, but it is consistent with HighTower’s strategy of snapping up ownership stakes in RIAs. Lexington was advised on the deal by Raymond James | Silver Lane Advisors, and it is expected to close in the third quarter.
Lexington was founded in 2000 by Michael Tucci and Kristine Porcaro and has 17 employees, including 11 advisors. The practice plans to grow its client base, expand through acquisitions and scale the business. It currently has $1 billion in assets.
The deal follows HighTower's strategic investments earlier this year in LourdMurray and Green Square Wealth Management and, in the past two years, WealthTrust and Salient Private Client (now HighTower Texas), including Salient Private Client's trust group.
HighTower was founded in 2007 as a landing place for wirehouse brokers, most of whom became partners in the firm when they joined. But since private equity firm Thomas H. Lee Partners acquired a "significant" piece of the company in 2017, HighTower has been restructuring deals and acquiring RIA firms.
In most instances, HighTower takes a range of minority to majority ownership of firms in exchange for a mix of cash and equity. Other companies, such as Emigrant Partners, a new service provider to independent registered investment advisory firms, have similar offerings.
LWM chose to join HighTower after considering strategic partnerships with a number of banks, private equity and wealth management firms, executives at the firm said. They said they were drawn to HighTower's "entrepreneurial culture," its middle- and back-office operational infrastructure and its collaborative community, which numbers 99 advisory businesses in 33 states and $70.3 billion in assets under management as of June 30.
Dave DeVoe, founder of San Francisco-based consulting firm and investment bank DeVoe & Company, said in an interview with WealthManagement.com that “Hightower just continues to demonstrate strong momentum. Their value proposition is resonating in the marketplace. Many advisors are seeking scale and they have created a platform that can help more advisors run a better business.” Lexington is HighTower’s fifth transaction this year, said DeVoe, “which puts them as one of the top acquirers in the space.”
The billion-dollar market “is hot in today’s environment,” DeVoe said, with his firm involved in seven such transactions this year. Two of them have closed, and four others are under discussion. While DeVoe did not work on this transaction, he added that “as one of the most active acquirers in the space, one might assume we might be working on one or more transactions with HighTower.”
Dan Seivert, CEO of Manhattan Beach, Calif.-based investment bank Echelon Partners, added that his firm “has stuff in the pipeline” with HighTower, and he would be surprised if the company didn’t do more deals later in the year.
He said HighTower’s shift in strategy toward acquiring majority pieces of deals means the company has become a “more relevant partner and potential buyer” in RIA M&A.
Moreover, he called the deal “a feather in HighTower’s cap” because Lexington “is a leading firm and they certainly had their options.”