Our US correspondent delves into the details of Cerity Partners' busy M&A activity during 2023, the strategy of its founder, and what this says about the direction of the sector.

Cerity Partners, one of the most aggressive buyers of US wealth management firms so far this year, is setting its sights on international expansion.

Merging with an advisory firm outside the US, most likely in Canada, Great Britain or Australia, has become a “top priority” for the fast-growing RIA, according to founder and CEO Kurt Miscinski.

Cerity’s goal has always been to become a “global professional services firm” and the 14-year old wealth manager is “actively in dialogue with various firms and parties to see if we would be a good fit,” Miscinski said. While there is “no imposed timeline” on a deal, one could happen “in the near future or year or two,” he stated.

Cerity specializes in providing planning, advisory and tax services to C-suite executives in large corporations and sees an international opportunity as those companies become increasingly multi-national.

Professional services firms such as Deloitte (accounting), Cravath, Swaine & Moore (law), and McKinsey & Company (management consulting) serve as models for prestigious brands which have achieved international success, Miscinski said. (High on his reading list this summer is The Anointed: New York’s White Shoe Law Firms - How They Started, How They Grew and How They Ran the Country.) 

In wealth management, AlTi Tiedemann Global, aka AlTi, a $65 billion firm formed by a merger between US and UK companies that went public earlier in the year, also aspires to international prominence. 

Asked if Cerity saw Tiedemann as a model, Miscinski, who began his career as an accountant at Arthur Anderson and went on to head the US wealth management business at Deutsche Bank, maintained he “didn’t know Tiedemann well enough” to make any comparisons.

(See here for recent data on M&A transactions in North America's wealth sector.)

Moving up the M&A leader board
Domestically, Cerity, which now has $54 billion in assets under management and is backed by powerhouse private equity firm Genstar Capital, has been on a tear.

The RIA has made seven acquisitions year to date, matching their entire 2022 transaction total. What’s more, Cerity is thinking big: its average deal size over the past few years has been $1.7 billion, according to DeVoe & Co.

Only Wealth Enhancement Group, which has bought eight firms so far this year, has outpaced Cerity this year. Captrust and Merit Financial Advisors have completed six deals apiece through July and Mercer Advisors, Beacon Pointe Advisors and Hightower Advisors have each bought five firms.

Miscinski’s disciplined approach and track record has drawn praise from M&A professionals.

“Kurt has surrounded himself with a leadership team that shares many of his own characteristics: smart, buttoned-down and methodical, fair-minded thinking," said David DeVoe, principal of the eponymous RIA consultancy. “Sellers are gravitating toward the brand they have developed with the ultra-high net worth market.” 

The RIA’s “differentiated business model and partnership opportunity” has struck a responsive chord with sellers, said Dan Seivert, CEO of the RIA M&A specialists ECHELON Partners. 

According to Advisor Growth Strategies founder John Furey, who has worked on deals with Cerity, the firm has gained “a very good reputation” for being “selective in the market and consistent with their strategy of finding advisors that are the right fit.”  

“Fair value”
Competitors are more measured, however.

Cerity was “quick to adapt” to market conditions by realizing success was “all about service expansion,” said Dave Barton, vice chair and head of M&A for Mercer Advisors. While “late to the game,” Cerity has done “a great job cloning Mercer,” Barton said.

Like all serial acquirers, including Mercer, Cerity faces headwinds from the higher cost of capital and stubbornly high valuation multiples. While EBITDA multiples may have plateaued, they “haven’t dropped meaningfully,” Miscinski acknowledged.

Multiples are driven by the “investment opportunity set” for buyers, which remains strong, Miscinski said. To remain competitive Cerity will pay “fair value” and offer sellers a “flexible” mix of cash and equity, he said.

According to Miscinski, Cerity has also been bolstered by strong organic growth. The firm is on track to add approximately 2,000 new clients net of acquisitions this year after adding 1,200 last year, he said. That’s on top of over 9,500 new clients (and over 330 new advisors) from mergers this year alone. 

Metrics aside, Miscinski clearly is determined to fashion Cerity into a McKinsey-like brand, with top shelf name recognition and what he calls “quiet cache” earned by “high standards of excellence.”

In addition to stressing an array of sophisticated private client services, Cerity has hired a number of advisors and executives from chief competitors Ayco, the Goldman Sachs–owned advisory business that also specializes in corporate accounts, as well as from Goldman itself. 

To get the word out, Cerity relies on targeted digital marketing and extensive centers of influence relationships to reach its elite corporate and UHNW market. 

“We want to make sure,” Miscinski explained, “that the people we want to know know us.”