Fill Your TAMP Plate: Orion And Brinker Merge, Leaving Private Equity Hungrier Than Ever

Big firms pool their assets and create a $40 billion powerhouse, proving that there’s no exit in sight as long as the cash keeps flowing. If you have fintech ambitions, now is the time to hit the gas.

Consolidation is a complicated process. Sometimes weak hands flush out and strong ones pick up the pieces.

But the competitive map really shifts when strong players team up in a marriage of mutual ambition. 

That’s where the turnkey asset management landscape is now, when Orion Advisor Solutions and Brinker Capital combine to accommodate an even wider pool of private equity backing.

Never mind the headlines and the nervous mood in the market. Neither management team was willing to cash out and go home.

This is still the hottest segment of the investment industry. Whoever captures real scale will have a home court advantage when the future comes calling.

Pipe plus portfolio

Brinker supports about $25 billion in advisor portfolios, providing all the technology (the “turnkey” component) that makes the asset management work.

Orion has focused more on technology, providing a broader operational envelope to integrate and automate a wide range of advisory functions.

In theory, each could have gone on alone, watching each other’s moves and investing in what amounts to redundant capacity to ensure that affiliated advisors aren’t lured away by a sweeter proposition elsewhere. 

Think of it as an arms race. Every platform provider – and we have to include Envestnet, SEI, AssetMark and others at this level – needs to match its rivals. It’s expensive.

But it makes more sense to buy complementary capabilities than reinvent the wheel, provided you can find the right fit at a reasonable price. That’s what Brinker and Orion are doing here.

Brinker has an entrenched position in the front office, close to the proposal screen and then extending out to the outside client portal. Operational support is robust but ultimately builds back from that place.

Likewise, Orion has invested a lot of effort moving forward from the back office, but many advisors still primarily consider it a technology partner. It’s the pipe that feeds solutions to affiliated firms.

Brinker and Orion could have kept evolving in parallel until one or both ultimately hit a competitive wall. They simply chose to team up instead.

This is not one of those opportunistic vulture scenarios. Neither was a weak hand. Nobody is really getting bought out here.

Brinker will continue under a version of its existing brand and will absorb various solutions Orion has accumulated or created over the years. Brinker management remains involved as investors as well as leadership.

This wasn’t an exit. They didn’t cash out. They aren’t retiring. They’re now simply part of a combined entity with more resources and a reach that already extends to advisors managing $1 trillion.

And now neither team needs to worry about competing with the other. Resources can be more efficiently allocated to expand the joint business. 

They’re all excited.

Backers aren’t leaving

Six months ago, anonymous sources and salacious headlines suggested that the owners of both companies were tired and looking to sell while valuations were relatively high.

Here we are now and reality has played out substantially differently. Orion’s private equity backers are holding on for a better payday down the road. Likewise, Brinker stakeholders remain invested.

The only thing that changes is the size of the various equity stakes. While the existing investors are now pooling their capital, another private equity partner is coming in as well.

That firm has wanted a piece of Orion for years. Now they’re getting the chance.

Again, nobody is leaving. It isn’t sentimentality. Everyone sees better things ahead and wants to come along for the ride.

Passing market clouds 

Of course the discipline of being a long-term investor is all about holding on when things look rough. You’re here for the marathon.

A lot of people try to game the finish line by talking about average private equity holding periods and exit ramps. But the actual investors aren’t living these arbitrary scenarios. 

They’re weighing the risk-return profiles against everything else in their portfolios and making tough choices. When they see a long win, they’ll hold on even if it means cutting another holding short to raise cash.

But there’s zero reason to let fold a hot hand early, especially when the market is feeling a chill. 

Nobody was in a rush to sell their TAMP stakes six months ago. Now that the pandemic has stepped everybody’s AUM numbers back, the calendar now needs to make additional time for sentiment and valuations to recover.

Holding periods can stretch. That’s a fact of life. 

After all, if AssetMark, SEI or Envestnet were uncharacteristically desperate to sell themselves now, they’d need to accept that their operations are worth 20-25% less than they were just three months ago.

That’s absurd. These businesses haven’t seen much COVID collateral damage at all. Existing clients aren’t leaving. They aren’t defaulting on their fees.

You know that. Everybody’s AUM stepped back in the market shock and prospecting pipelines need more time to pay off now.

Growth ramps are a lot lower now. The giant advisory platforms are probably looking at a flat year in terms of profitability.

But when the market as a whole is braced for a double-digit earnings decline, a flat year looks not only defensive but impressive. I’d rather be here than in a lot of more fragile themes.

After all, if you need to take another year to think and plan, enough cash is still flowing to support your timeline.

And if you’re ambitious and want to get into this space before it closes, there’s time for that too. Investors remain hungry for interesting opportunities in this space.

We’ve just witnessed that. There are literally more potential buyers for the Orion-Brinker combination than motivated sellers.

People who weren’t invited to that party still want in. They’re hungry. If you’re hungry, you can combine your ideas with their money and make it happen.

There’s still a lot of opportunity left in this space. The consolidation has barely begun and there are dozens of small and eager contenders sprouting, each with an innovative offering.

Very few will make it to the finish line on their own. Most will get absorbed into something larger. That’s how life works.


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