JPTD consults on a $17m all-in offer for a $3m Independent Advisor
Our client is an ensemble practice of 3 advisors with a seasoned support staff team. They are a hybrid RIA with 90% of its revenue being fee-based and 10% being from annuity, alternatives, and insurance. This practice was located in a small rural city and has been in its location for 20 years. The lead advisor had responsibility for compliance, operations, and recruiting. The group as a whole was growing at a rate of 12% CAGR over the past 3 years for top-line revenue.
The client's main goals are:
- To derisk the firm and monetize the ensemble practice.
- To continue to work in the practice for another five to ten years.
- To find a potential suitor who was strong in lead generation, marketing, and technology.
- To make sure their clients and operations team were taken care of post-transaction.
- Minimize disruption in any move.
EBOC - $1.8m
EBITDA - $1.475m
# of households - 800
AUM - $400,000,000
3-year CAGR - 12%
Years in biz - 20
Headline Price (consideration) - $17M (Approximately 6x gross revenue and 12x EBITDA)
Paid at Close - 60% of headline price, 93% capital gains
End of year 1 earn-out based on revenue retention - 10%
End of year 2 earn-out based on revenue retention - 10%
End of year 2 growth bonus based up revenue CAGR - 20%
Ability to take up to 40% of upfront bonus in PE firm stock. PE Stock pays dividends monthly
W-2 model with 37% payout and no expenses on new business