How Merchant snagged a stake in $3.1bn RIA Corient
The deal is ‘emblematic of the evolution that’s taking place in the wealth management industry,’ according to Merchant executive chairman Marc Spilker.
Corient Capital Partners, a $3.1bn RIA based in Newport Beach, California, did its homework before signing on the dotted line.
‘We explored a bunch of different options,’ Corient chief executive James Rooney said. ‘We looked at private equity as a potential solution. We looked at other debt recapitalization options.’
Dynasty Financial Partners launched Corient in 2015 when seven ex-Merrill Lynch private banking and investing group advisors exited the wirehouse. However, Dynasty does not take equity stakes in the RIAs that make up its nationwide network.
‘Dynasty had some options, but we were looking for a permanent capital solution, an equity partner, and somebody that could work alongside us to fuel the growth of the business,’ Rooney said.
Corient eventually came to an agreement in which private partnership Merchant Investment Management bought a minority, non-controlling stake.
One thing that helped Merchant stand out from competitors is an investment purview that extends into RIA-adjacent businesses. The New York-based firm backs – among other companies – outsourced CFO firm Compass, compliance firm Advisor Assist, and practice management consultancy Wealth Advisor Growth Network. Merchant also has an in-house alternative asset manager, which Rooney indicated was a factor in his decision to partner with the company.
‘[Merchant] having their own investment and asset management capabilities definitely played a role, because we think alternative investments specifically are important to ultra-affluent clients and families,’ Rooney said. ‘To build those effectively, you need connectivity to New York, London, and some of the other major financial centers, as well as people that have come out of the major financial institutions around the globe. We felt like Merchant gave us more of that connectivity.’
If an RIA so desired, it could use Merchant’s services for virtually all aspects of its business, including lending. Merchant launched its own credit business in 2019.
‘I see [the Corient deal] as emblematic of the evolution that’s taking place in the wealth management industry,’ said Merchant executive chairman Marc Spilker, the former president of Apollo Global Management. ‘Businesses are aligning with an ecosystem of independent wealth firms and service providers that collectively offer full access to the most advanced industry tools and solutions.’
Joined at the hip
Merchant’s range of investments have also led some critics to cry foul, arguing that it creates conflicts of interest.
But Matt Brinker, a managing partner at Merchant, said that the RIAs it invests in don’t have to use its other products.
‘They’re not required by any stretch to leverage the Merchant ecosystem, but it’s something that we certainly make available to our partners,’ said Brinker, who previously served as United Capital Financial Advisers’ top dealmaker.
He added that unlike other major acquirers, Merchant doesn’t have a buy-and-flip mentality.
‘We consider ourselves a strategic, minority, non-control investor that thinks long term,’ Brinker said. ‘There is a high degree of interest within our community in firms that want an alternative to the capital sources out there today and that think in increments of three to five years.’
The pitch seems to be working. Days after announcing the Corient deal, Merchant announced a similar transaction with St. Louis-based RIA Sunpointe Investments.