Chicago-based Mesirow, an employee-owned financial services firm overseeing some $256.6 billion in assets across three core businesses, is acquiring Front Barnett Associates, a local registered investment advisory firm with about $1.2 billion in client assets.
In a deal expected to close late this month, Front Barnett will join Mesirow’s legacy wealth management business and operate as a separate platform, maintaining existing operations, investment processes and leadership as Front Barnett, a Mesirow Company.
Helmed by Chairman Marshall Front, who founded the firm in 1994, along with principals Mickey MacMillan and Peter Wahlstrom, Front Barnett offers customized equity and fixed income investment management for wealthy individuals. The transaction will make the firm’s investment strategies available to all Mesirow clients, while giving Front Barnett access to expanded technology, back office and regulatory support, as well as a host of other complementary strategies.
The two firms had been aware of each other for “a long time,” and the idea to explore a transaction was floated by a mutual industry acquaintance, according to Mesirow President and COO of Investment Banking Brian Price, who also heads up the Advisory Services division.
“The deal was really attractive on both sides,” he said. “They have a different approach to how they manage money from some of our other wealth management teams and their strategy, which is a fundamentally driven strategy involving direct ownership of equities, ETFs and fixed income securities, among others, in addition to this tremendous economic model they have that is complementary to what we're doing in our business.”
“We have phenomenal research capabilities and they have great research capabilities, and they're not in the same areas,” said Price. “So, I think we're both looking at leveraging each other's research capabilities into new investment strategies and asset classes for our clients.”
"Our partnership with Mesirow brings important benefits to our clients and firm," Front said in a statement. "We will gain additional expertise and support in managing compliance, technology and administrative matters as we continue to seek competitive investment returns and deliver the high level of personalized financial advice and communications our clients expect."
Price explained that, while acquired firms become employees of Mesirow and are quickly integrated into the culture, they’re looking for teams with investment philosophies and processes that are working and can be additive to the larger ecosystem.
“We don’t micromanage how our wealth management teams invest or how they serve their clients,” he said. “What was important to Front Barnett is the ability to remain independent in their investment structure for clients and to be able to serve those clients with the same continuity they’ve provided prior to this. And that’s something we can provide because we’re employee owned and exclusively client- and employee-oriented and have the infrastructure in place to support that type of independence.”
The deal represents a new phase of growth for Mesirow, which has completed a number of acquisitions for its global investment management business in recent years.
“We are focusing on now, and making a priority within, the wealth management space, and we hope this will be one of many acquisitions,” said Price. “Historically, growth in the wealth management space has been organic or came from recruiting new advisors. Front Barnett, I hope, will kick off a strong track record in acquisitions.”
While Mesirow is in conversation with “several” potential targets, Price doesn’t expect to announce any additional deals over the next six months. The firm is actively looking to acquire practices in specific geographic areas—such as Florida, where the firm recently expanded its footprint—as well as in a specific size range—from $150 million to $1.5 billion.
“We will sometimes go smaller or larger, depending on the team, the culture and the strategy of the firm we’re looking at,” said Price.
The focus is on full acquisitions, but Mesirow is open to making a minority investment in firms that are a good cultural fit. And, while deals tend to be all cash, all employees are given an opportunity to buy equity and Price pointed out that 100% of voting stock is currently owned by firm employees.
Prices said Mesirow doesn’t have a specific growth goal and he doesn’t expect to jump on the private equity train any time soon, but stopped short of saying the firm would never consider an external investment.
“I think we started as a boutique and we'll likely stay a boutique,” he said. “We're not looking to be the largest in the industry. I'd say that we'll always remain privately owned and our view is to kind of grow to the point that best serves the clients and the advisors.”
Founded by Norman Mesirow as a wealth management shop in 1937, Mesirow has grown to encompass three businesses—wealth management, global investment management, and capital markets and investment banking—across 17 locations in the continental U.S., as well as offices in Puerto Rico, London and Hong Kong.