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Private equity backer says Kanaly Trust, Mercer Advisors deal melds complementary platforms


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Private equity backer says Kanaly Trust, Mercer Advisors deal melds complementary platforms

The mergeragreement that will bringMercer Advisors together with Kanaly Trust is a match of complementary platformsthat will result in scale that benefits both companies, according to executivesinvolved in the deal.

announcedin March 2015 an agreement to purchaseMercer Advisors from Lovell MinnickPartners LLC. In a transaction announced almost exactly a year later,Lovell Minnick would surrender its majority stake in Kanaly Trust, though it willretain a significant minority stake, said Jason Barg, a principal at the privateequity firm. Barg believes the resulting company is worth a continued investment.

"We believe very much in the strategy that the combinedfirm is pursuing," Barg said in an interview.

Basedin Santa Barbara, Calif., Mercer Advisors is a total wealth management company whoseservices include fee-only comprehensive management along with financial planning,family office services, retirement benefits, distribution planning, estate planningand tax management. Kanaly Trust provides wealth management and financial planningand services to families, individuals and estates. The latter company would bringa strong presence in the ultra-high-net worth space to the combined entity, Bargsaid.

"Themerger with Kanaly Trust is a significant step forward towards scaling a nationalwealth management firm to a broader base of sophisticated clients," Genstarmanaging director Anthony Salewski added in a statement.

The dealwould also sharply boost the combined entity's assets under management. Mercer Advisorsbrings $6 billion in client AUM to the table, while Kanaly Trust adds $2 billionof AUM. Drew Kanaly, chairman of Houston-based Kanaly Trust, said in a statementthat the tie-up would give his company's high-net-worth experience a more nationalreach.

The countryis poised for a generational turnover of wealth, and Kanaly's experience in trustswould be a key additive to Mercer, Barg said.

"Together,they can deliver a fair amount of value to their clients," he said.

The scalethat the deal would offer the two companies means more than size, according to Barg.Being bigger and complementary allows managers to offer more to both clienteles,he said.

"[Scale]allows you to have a more comprehensive and developed investment platform,"he added.

David Barton, CEO of Mercer Advisors,would run the combined company. When Genstar bought Mercer in 2015, Barton notedhis new sponsor's ability to help with Mercer's growth aspirations with more officelocations and a larger sales force, as well as with recruitment, credit facilitiesand more strategic partnerships.

In November 2015, Barton further voicedMercer's growth ambition when announcing the acquisition of Guilford, Conn.-basedSpruce Hill Capital.

"This acquisition, the first ofmany, heralds the beginning of our venture beyond organic growth alone, as we pursueour goal of becoming the first authentically national [registered investment adviser]in the United States," Barton said in a statement. The purchase of Spruce Hill allowed Mercer tobroaden its presence on the East Coast for current and future clients, the companysaid.

For Lovell Minnick, the proposed Kanalydeal is not an exit, since Lovell Minnick will remain a minority holder backingthe post-merger business strategy. The company will maintain wealth management asa core investment focus, Barg said.

A frequent M&A player in the assetmanagement space, Lovell Minnick disclosedin June 2015 that it took a 20% investment interest in Lincoln Investment Planning LLC. In a announcing that transaction, Presidentand Managing Director Jim Minnick highlighted Lincoln Investment's broker/dealermarket position and consistent growth in its adviser network.

The private equity firm was also to be a bidder in August2015 for Guardian Life Insurance Co.of America's RS Investments. Guardian Life Insurance eventually a deal to be sold to Victory Capital.