Private equity firm Warburg Pincus has agreed to acquire a minority stake in Edelman Financial Engines, valuing the U.S. investment advisory services provider at US$7.3 billion, including debt, the companies told Reuters on Sunday.
The deal represents a 62% increase in the valuation of Edelman Financial Engines since 2018, when buyout firm Hellman & Friedman created it through the merger of two companies. It underscores the growth of the registered investment adviser (RIA) industry as more Americans seek professional help to invest their savings.
Hellman & Friedman will retain a majority stake in Edelman Financial Engines, the companies said. They did not disclose the exact stake that Warburg Pincus was acquiring, but the private equity firm's head of financial services, Michael Martin, said in an interview it represented a "mid-to-high teens" percentage equity ownership.
"We have always liked the business, and we would have liked to have come in when the company was taken private (in 2018). When this opportunity came our way, we were delighted to be able to pursue it," Martin said.
Edelman Financial Engines has more than $260 billion in assets under management and services nearly 1.3 million customers from a network of more than 150 offices across America, according to its website.
The Warburg Pincus investment will support Edelman Financial Engines' goals including an expansion of its 401(k) business, extending its digital platform and boosting its brand to lure in new clients, the company's chief executive, Larry Raffone, said in an interview. He added that the company's customer base will grow significantly as more baby-boomers seek out professional financial advice for their retirement.
"Planners are essential to the client experience but they have to be supported by the very best technology, so we are dramatically investing in our digital platform," Raffone said.
Hellman & Friedman acquired a majority stake in Edelman Financial from buyout firm Lee Equity Partners in 2015 in a deal that valued that company at more than $800 million, including debt. In 2018, Hellman & Friedman took private another company, Financial Engines, in a $3 billion deal and merged it with Edelman Financial. The combined company was worth $4.5 billion at the time.
Warburg Pincus owned a stake in Financial Engines but had sold it in the stock market before Hellman & Friedman clinched the acquisition.
Moelis & Co was lead advisor to Edelman Financial Engines on the transaction, with PJT Partners and Simpson Thacher & Bartlett also providing respective financial and legal advice. Warburg Pincus was advised by law firm Wachtell, Lipton, Rosen & Katz- Reuters