San Francisco-based private equity firm Valeas Capital Partners is buying a chunk of Sequoia Financial Group, an Ohio-based registered investment advisor with a little more than $10 billion in client assets and big plans for continued growth, the RIA announced Wednesday.
Valeas has committed more than $200 million alongside existing minority investor Kudu Investment Management in a transaction expected to close at the end of the month. Sequoia will become the third company in Valeas' “high-growth, tech-enabled” portfolio, along with two health tech start-ups, and its first in the financial services sector.
Valeas co-founders Rob Little and Ed Woiteshek, both of whom spent time at private equity firm Hellman & Friedman and have experience investing in the financial services sector, will serve on the Sequoia board of directors.
Sequoia, which was founded in 1991 and today provides financial planning and wealth and asset management services to more than 6,200 clients, will remain majority-owned by employees. The firm plans to use the added capital for investments in talent, technology and expanded client services while accelerating an inorganic growth strategy that has only become a focus over the last decade.
“The first decade was about figuring out what we wanted to be when we grew up,” said Sequoia founder and CEO Tom Haught. The second decade was about building out his team “to be ready to do things,” and the last 10 years have been about growth—organic and inorganic.
The firm has grown its top line by 15% organically over the last 10 years, according to Haught, and by as much as 25% through M&A.
After making a handful of smaller acquisitions, Sequoia took a minority investment from Kudu in July 2020 and followed up with two large deals in 2021 that added around $4 billion in assets and prompted the founder of M&A consulting firm DeVoe & Company to declare it one of “about 25 major firms that will shape the RIA industry over the next five years.”
A strategic planning conversation at the end of last year convinced the firm’s leadership that it was best to seek additional capital before the need arose, said Haught.
“We think a lot of people are leaving the brokerage model and moving to the independent, fiduciary model,” he said, “and we want to be there to help them with that. And it’s no secret that the demographics say there is going to be a lot of succession over the next decade or two.”
Sequoia is focusing on firms with a compatible culture, first and foremost, said Haught, but is also looking to add talent and capabilities in geographically compatible areas such as Michigan, Ohio, South Carolina and Florida, where they already have a presence, or in adjacent states such as Indiana, Virginia and Kentucky. He also said M&A could be a way to add additional talent, expertise and capabilities to their growing stable of around 60 advisors. Acquired firms adopt the Sequoia brand and are migrated to the firm's technology and investment platforms.
Characterizing the firm’s M&A pipeline as “robust,” Haught said he expects to add about two firms a year going forward, continuing to grow revenue by 25% annually through M&A.
“Tom and his colleagues have built a formidable firm over the past three decades and we remain enthusiastic and committed investors,” Kudu Chairman Charlie Ruffel said in a statement. Ruffel will also serve on the Sequoia board. “We look forward to being part of this next chapter of Sequoia’s continued growth, alongside the Valeas team.”
“Sequoia has a proven strategy and a strong, client-centric culture,” said Valeas’ Little. “We are thrilled to partner with Tom and Sequoia’s extremely talented team.”
Some of the additional capital will be put toward expanding client services and improving technology, according to Haught, including adding specialists and implementing integrated trustee and tax planning services.
“I don’t have any plans to slow down,” he said. “We think there’s a bright runway ahead and this helps put us in a strong position to go execute on our vision.”