Private equity firm Thomas H. Lee Partners recently took Hightower off the market because it didn’t get the price it was looking for from potential buyers, according to sources close to the firm and the investment bankers involved.
Citywire.com first reported that THL was pursuing a sale of its majority interest in the $130 billion RIA platform and that the private equity firm had pulled it back from the market.
Several sources close to the process say that THL could not find a buyer willing to pay the multiple it needed.
“What they were looking for was a multiple that would’ve justified to their existing LPs that this was a good investment that they would get a decent return on it,” one source said.
According to sources who declined to be named, THL interviewed at least six private equity firms about the possibility of buying Hightower, but only two firms came forth with offers. THL was looking to get 13 to 16 times EBITDA, roughly the same range Focus Financial Partners got when it went private. These sources said the offers were in the range of 7 to 10 times EBITDA. After extensive negotiations, one of the two firms offered 10 times EBITDA, their last and final offer.
“That’s the reason Hightower wound up not pursuing it further,” one source said. “At this point, they’re kind of in a tough spot. You can look forward to significant employee cuts that I think are now in the offing.”
THL is exploring headcount reductions at the home office to improve Hightower’s EBITDA in case it decides to go to market in another year or so, according to sources.
Spokespeople for both THL and Hightower declined to comment.
In a March interview with Hightower CEO Bob Oros, he said THL was not looking to sell Hightower.
In April, Hightower named Gurinder Ahluwalia, the lead director of the firm’s board of directors, president, a newly created position. Ahluwalia is an executive partner in THL's financial technology and services vertical.
Last week, Meghan McCartan, who stepped into the top marketing role at Hightower in 2021, left the company, according to a LinkedIn post. McCartan, who became chief marketing officer at Hightower in July 2022, shared the “bittersweet update” that she had departed the firm, saying she was unsure but excited about her next opportunity.