Family Office
Sanders Morris Harris buys Edelman
Deal to extend high-end group's reach into the mass-affluent
arena. Sanders Morris Harris Group (SMHG), Houston-based
financial-service holding company, has bought a 51% stake in the
Edelman Financial Center, a financial-planning firm that serves
the greater Washington, D.C., area. SMHG has agreed to acquire
the remaining 49% over the next four years. Parties to the deal
say the acquisition strengthens SMHG’s position as an advisor to
mass-affluent clients.
“Adding [Edelman] to our asset-management group fits our strategy
of providing our clients with the full spectrum of investment
opportunities and services,” says SMHG president Robert Garrison
II.
More specifically, the deal bolsters SMHG’s standing as an
advisor to clients in Edelman’s mass-affluent sweet spot,
according to an Edelman press release. SMHG’s other
private-wealth businesses are aimed at higher-end clients.
Ric Edelman, founder and chairman of Fairfax, Va.-based Edelman,
will continue to run the firm under the terms of a long-term
employment agreement with SMHG. “Serving the needs of our clients
is our top priority,” says Edelman. “Joining the highly qualified
professionals of [SMHG] will help us to maintain that ability for
years to come.”
Three tranches
SMHG paid $12.5 million in cash and stock for its initial stake
in Edelman, according to an SMHG 8-K filing with the Securities
and Exchange Commission. On the third anniversary of the
purchase, SMHG will purchase an additional 25% interest in
Edelman, paying 25% of a multiple between eight and 11 times
Edelman’s net income in 2007. The year after that, SMHG will buy
the remaining 24% of Edelman for 24% of a multiple between eight
and 11 times Edelman’s net income in 2008.
Edelman’s 2004 pre-tax net income was $3.2 million on revenue of
$17.7 million, adjusted for one-time expenses.
Garrison says he expects the deal to be accretive to its earnings
this year as his company moves quickly to introduce Edelman’s
wealth management services “across our other asset management
businesses.”
Edelman aside, SMHG’s operating entities are Sanders Morris
Harris, Charlotte Capital, Kissinger Financial Services, Pinnacle
Trust Co., Salient Partners, SMH Capital Advisors and Select
Sports Group. ATaken as a whole SMHG manages over $10
billion in client assets.
Putnam Lovell NBF Securities advised Edelman on the deal; Simpson Thacher & Bartlett acted as transaction counsel. –FWR
