Bluespring Wealth Partners, the RIA acquisition arm of Kestra Financial, said earlier this week that it has acquired Hickory Asset Management, a Concord, Ohio-based RIA with nearly $153 million in client assets, according to its latest Form ADV. Kestra, an independent broker/dealer and corporate RIA, launched Bluespring last month, in an effort to acquire experienced RIAs and wealth management firms. Terms of the deal were not disclosed.
Bluespring focuses on acquiring firms with succession issues. Stuart Silverman, the company’s president, said in an interview Thursday that with only 11% of RIAs under the age of 40, a lot of older RIAs are ready to pass the baton but don’t know how.
When Bluespring acquires a company that does not have a succession plan, it puts the founder and the successor in its Successor Academy, an “intensive” two-year program that consists of face-to-face meetings twice a year with other people in the same position, case studies and monthly follow-up calls about things like how to manage human resources, all of which are aimed at “making the transition smooth so the founder is teaching the successor the ‘secret sauce,’ or how he or she does business,” said Silverman.
Bluespring acquires companies with the plan in mind to turn them into “regional hubs,” said Silverman. It also treats principals at the firms as entrepreneurs, with creative compensation programs involving things like equity incentives. “To a founder that’s attractive,” said Silverman, “and to a successor they want to make sure that even if they can’t buy the company, they want to manage it and be treated like an entrepreneur.” Also, Bluespring allows companies to use their own technology but offers them a full suite of resources in case they need them.
Bluespring is flexible when it makes acquisitions, its only rules being that it must take at least a 51% stake and it only looks at larger companies with at least $1 million in EBITDA.
The acquisition is just more proof that the M&A game is running full speed ahead. Dave DeVoe, managing partner of DeVoe & Company, a San Francisco-based consulting firm and investment bank specializing in the wealth management business, said, “RIA activity has moved from red hot to white hot over the last few weeks. Unless there is a significant shock to the system, 2019 will surely be a record year. Of course, a market correction would qualify as a 'significant shock', and I'm not sure if anyone is ruling that out as a possibility.”
Silverman said that now is a “great time to be acquiring because in down markets investment advisory firms do even better. We’re in this for the long haul, so we’re not looking at what they will do this year or next.”
He added that market watchers should expect several more acquisition announcements in the coming months from Bluespring as the Austin, Texas-based company is on the hunt. Carolyn Armitage, managing director at Manhattan Beach, Calif.-based investment bank Echelon Partners, said that “while this deal is on the smaller side, it’s a start, and given the experienced leadership, financial backing and positioning of BWP, the industry could see many more success stories in the coming months and years.”
DeVoe added that while Bluespring, which launched publicly in July but which has been operating since January, is “a new player on the scene, [it] enters the market with a seasoned management team and deep pockets.”
Kestra has $92 billion in AUM and supports over 2,000 independent investment advisors. The IBD was recapitalized in February when private equity firm Warburg Pincus became the majority stakeholder in the firm. That deal was rumored to be in the $700 million to $800 million range.