Looking back at a takeover of the US wealth management house, our correspondent examines how Focus Financial can continue to push forward, its business opportunity and the state of the market.

Two years into Clayton, Dubilier & Rice’s (CD&R) private takeover of Focus Financial Partners, what is the private equity powerhouse’s endgame for the $175-plus billion RIA?

Focus has just created the new position of chief strategy officer, naming veteran corporate development head Travis Danysh in the role. One of the firm’s strategic objectives is nothing less than establishing Focus as the industry’s biggest RIA, competing head-to-head with the likes of industry giants Creative Planning and Mercer Advisors, said Danysh.

But how does Focus achieve that goal and how does CD&R, which has been known to exit investments in as little as three years, ultimately monetize their investment?

The key to Focus’ future, say industry executives, is CD&R’s multiple arbitrage model of buying an underappreciated asset and maximizing its value, according to industry executives. (Focus’ other PE investor is minority stakeholder Stone Point Capital.)

“The strategy doesn’t really matter because the entry point was so low,” one veteran dealmaker said. “CD&R bought Focus at a multiple of around 12 times EBITDA and they’re likely to sell at a multiple north of 20. There’s a lot of slack there and a lot of ways to win.” 

Where future earnings will come from
Focus’ immediate priority is to convert as many of its semi-independent “network” firms, from which Focus collects a fee. It has a preference on cash flow and typically receives 50 per cent of the cash flow above an agreed-upon target, into full-fledged “partner” firms that the RIA owns outright.

To date, approximately 25 former network firms are now owned by Focus Partners, leaving around 60 in the network. Focus has a “total opt-in approach,” Danysh said, touting the benefits of sophisticated investment platform, scale, efficiencies and a range of services the firms can access.

In a “perfect world” all network firms would opt in, Danysh said, but he suspects that “a healthy number” will stay in the network. Nathanson estimated that eventually about 80 per cent or more of Focus’ earnings will come from the Partners division in a recent podcast interview with Steven Levitt, managing director at investment bank Houlihan Lokey.

Key hire from Fisher
Centralizing the firm and retrofitting its platform are also key strategic objectives. 

Notably, in May Focus hired Mark Israel, a former top executive for the industry’s largest RIA, Fisher Investments, as chief technology officer. “Israel is very smart and has an impressive track record with Fisher,” said industry consultant Andy Besheer. “He will help Focus’ platform operate more efficiently and with more scalability.”

Israel’s hire is evidence that Focus needs an “industrial strength, enterprise level tech stack” to compete with the industry’s top firms – and wirehouses, said consultant Alois Pirker, CEO of Pirker Partners. “Retrofitting the platform brings Focus closer to a broker-dealer and bank level model and makes them more valuable,” Pirker said.

ECHELON Partners CEO Dan Seivert agreed. “It plays into a trend we saw at last month’s Deals & Dealmakers Summit,” Seivert said. “Top performing firms are embracing centralization via a large platform and see it as a major key to unlocking additional value.”

Growth issues
Then there’s the Holy Grail of every major RIA: growth.

Before going private in 2023, under founder Rudy Adolf, Focus gobbled up over 300 firms in 17 years boosting assets inorganically. But even though Danysh and Nathanson say M&A is a priority, transactions have slowed considerably.

Focus did acquire $10 billion Los Angeles-based Churchill Management Group in May, a major coup. But it was the firm’s first large deal since last September, and its other two 2025 acquisitions were both much smaller. Meanwhile industry rivals such as Mercer Advisors, Mariner Wealth Advisors, Carson Wealth and Merit Financial Advisors have all made at least 10 acquisitions or more to date, according to preliminary deal volume figures from ECHELON.

While Danysh said Focus is still in the M&A hunt, and willing to pay a premium price for quality businesses that are a strategic fit, the firm is no longer pursuing succession-oriented deals as it has in the past.

While CD&R would welcome an increase in Focus’ size, it “wouldn’t do much for the multiple, given the current scale” according to Seivert. “What will push the multiple higher is more growth and more integration.”

Focus is hoping that organic growth ranging from 6 per cent to 8 per cent will take up the slack from M&A, but industry averages are well below those numbers. 

Boosting net new revenue assets has become the central directive for Focus offices, according to regional advisors, while the firm also seeks to fatten profit margins by negotiating new discounted contracts with vendors based on its growing scale.

International questions
Focus also has an international presence in Canada, Australia and Europe. In April CityWire reported that Focus planned to sell off some of those businesses, prioritizing a sale of Octogone Group, a multi-billion dollar Swiss wealth manager Focus added as a partner firm in 2022.

Danysh, who is also is executive chairman of Focus’ Australian business and serves on the RIA’s executive committee, wouldn’t comment on Octogone’s status. He did say that Focus was “shoring up” its international business and noted recent “management entity buyouts” at Canadian firms Cardinal Point and Dorchester and Australian firm Escala.

PE “always has a plan”
So where is Focus headed?

When a private equity firm makes an acquisition, it “always has a plan where the business they will go,” said CD&R operating partner Dan Glaser, speaking at the Schwab IMPACT conference in San Francisco last November.

Most private equity investments last from five to seven years and few industry observers think CD&R will deviate from that model, although the firm has been known to stay invested for up to 10 years.  In San Francisco, Glaser hinted that the PE firm may indeed remain invested in Focus for a while, with monetization events along the way. CD&R is in “no rush” to exit Focus, a company spokesman said. 

In November, Glaser said there was still “ambiguity” around “what the exit plan could be.” Asked if there was more clarity nearly a year later, the CD&R spokesman said “there’s lots of different options for Focus. It’s a very good business.”

Exit options
Those options include a mega-merger with a top-tier RIA and a sale to a well-capitalized buyer such as a wirehouse, an independent broker-dealer, a bank or a sovereign wealth fund. A recapitalization with another private equity firm is another option that “many similar RIAs have taken multiple times,” Dan Seivert noted. One veteran CEO believes that Focus may also be sold off in several large units.

While few expect Focus to return to the public markets after its ill-fated run as a public company from 2018 to 2023, Glaser wouldn’t discount the possibility “somewhere down the road.”

A longtime industry executive turned private equity consultant doubts there will be an IPO “because there’s too much heavy lifting. The private market is very frothy and the volume of PE sponsors coming to the table is massive.”