Don’t expect that fast-paced deal volume to abate anytime soon, this article argues. Canada-based CI Financial has made another acquisition in the US wealth space, pointing to a seemingly relentless trend.

CI Financial’s latest blockbuster acquisition has dispelled any lingering doubts about the Canadian asset manager’s ability to maintain the blistering acquisition pace that has disrupted the US RIA market.

Dowling & Yahnke Wealth Advisors, a San Diego firm with over $5 billion in assets under management is CI’s 14th US transaction since November 2019 and boosts CI’s US retail assets to around $55 billion. The Canadian firm has approximately $230 million in combined asset and wealth management assets.

The deal more than doubles CI’s assets in the lucrative southern California market. Dowling & Yahnke is the company’s second-largest US acquisition to date and will be its first office in San Diego.

“Dowling & Yahnke is a great firm in a great market,” said Dan Seivert, CEO of ECHELON Partners. Winning such a highly coveted RIA “tells us that CI is doing a great job of selling its value proposition,” Seivert explained. 

“Once a serious acquirer gets over $50 billion in assets, it is likely best to do deals of $5 billion or more,” according to Seivert. “There are only so many of these firms at any given time and very few of those are for sale.”

Lofty target
Ever since taking over as CEO of CI Financial in September of 2019, former McKinsey & Company and Wisdom Tree Asset Management executive Kurt MacAlpine has made it clear he wants the Canadian company to be the “leading integrated private wealth platform” in the United States.

By all accounts, he’s advancing steadily towards that goal.

"Over the past 18 months, CI has quickly become a dominant acquirer with a self-assured speed that the wealth management industry hasn't seen before,” said M&A veteran Peter Nesvold, who heads the merchant bank Nesvold Capital Partners.

For US advisory firms considering a sale, CI represents a well-capitalized buyer with a strong balance sheet that is also a public company listed on the New York Stock Exchange. CI promises a large degree of autonomy along with shared resources and a cross-border referral program with CI’s Canadian advisory firms targeting high net worth Canadians who spend time living in the US.
 

Deep pockets 
CI has another big advantage in the fiercely competitive M&A market: it is willing to pay premium prices.

“Almost singlehandedly, they have raised the multiple that RIAs now expect for their businesses,” said one rival who asked not to be identified. “That sort of impact is very rare.”

Focus Financial CEO Rudy Adolph referred to rivals bidding RIA multiples into the mid-teens as a “bunch of drunken sailors who seem to be spending money like water,” in an interview with Citywire earlier this year.

While no one disputes that CI is an aggressive bidder, MacAlpine has said that CI is not always the highest bidder, an assertion that investment bankers involved in CI deals confirm.

In an interview before the company’s most recent deal, MacAlpine said CI is “very confident with what we’re paying for the quality we’re getting.”

While financial terms for the Dowling & Yahnke deal were not disclosed, it’s unlikely that the purchase was a bargain. Because of the San Diego RIA’s large size, Scott Chan, equity research analysts for Canaccord Genuity in Toronto, estimates that CI “paid an above average multiple” compared with its past deals.

Critical challenge
Integrating all the disparate firms it has bought will be CI’s biggest challenge, industry observers agree.

“Will they share common branding?” one executive asked. “Will they standardize client delivery? Or will they allow the various affiliates to continue to operate in a 'best of breed' type model?”

While the company has tentatively begun to rebrand its advisory firms as “CI Private Wealth,” the US firms continue to keep their legacy names with little outward sign of amalgamation.

Compounding CI’s integration challenge is its high deal volume, according to Seivert. â€śBuilding a support infrastructure that connects all these firms and helps them with growth and efficiency is done through a combination of people and technology, and it takes time to build,” he said.

Don’t expect that fast-paced deal volume to abate anytime soon.

Expanding the company’s wealth management platform is one of the company’s top strategic priorities, MacAlpine continually reiterates - as he continues to buy more firms.

And Canaccord analyst Scott Chan estimates that CI could make two to three RIA acquisitions per quarter going forward “as long as the market is ripe for it.”