There’s absolutely no reason the TAMP’s parent would entertain buyers when publicly traded peers are breaking records.
It’s a big week for rumors around turnkey asset management platforms. First the report that Brinker Capital was contemplating a buyout and now Barron’s is talking up a deal for Orion Advisor Services.
I believe the Brinker story at least. They’re founder-owned and probably open to finding a parent with the resources and industry leverage to take their growth to the next level.
But Orion is a completely different situation. One thing is clear, however: as the intersection between finance and technology heats up for investors, we’re going to hear a lot more of this kind of buzz around all the players.
(We just released our expanded and enhanced 2020 America’s Best Tamps guide for free download HERE. Like they say, you can’t tell the players without a scorecard.)
A choice of exits
All it took to raise the buzz for Orion was the realization that the company is doing well and its private equity owner TA Associates has held onto it for nearly five years now.
The performance is impossible to argue with. A year ago, there were $700 billion in assets under administration on the Orion platform. As of this week, that number had ramped up to a cool $1 trillion.
Roughly 50% growth is good enough to tempt any number of asset managers, custodians or rival advisor technology vendors looking to bolt on big scale. I do believe Orion and its owners are fielding plenty of queries.
However, exiting now would effectively cut the ride short, locking the current ownership out of the fun ahead. You only push that button when you think growth has hit a wall.
Despite reporting to the contrary, this particular private equity firm doesn’t get itchy around the five-year anniversary of any particular holding.
A casual search of the firm’s holdings reveals that the partners are happy to hang onto portfolio companies for 8-11 years without appreciable strain and that a few financial services positions have stayed on the books for close to a decade.
Unless the partners get an offer they truly cannot refuse, there’s zero urgency to sell. After all, they can always take Orion public if they really need to cash out and put their money to work elsewhere.
AssetMark had a great IPO. It and Envestnet are breaking records. And on the whole the deal market is healthy enough that TA Associates can take their time.
Investors crave these companies for good reason. They’re the future, bridging the gap between robot mass-market platforms and the human advisors who really hold the keys to the high-net-worth world.
Automating the rote work of portfolio construction and maintenance liberates those advisors to chase more clients. The clients are thrilled. The advisors have more time to grow their businesses and in many cases operate more profitably as a bonus.
Companies like Orion are still in the early stages of conquering the world. TA Associates can wait.
Resources have already been invested
Furthermore, TA Associates has done plenty of heavy lifting to make sure Orion has what it needs to thrive on its own: buying other companies to bolt them into the Orion platform, restructuring the org chart to create a more streamlined profile.
That tells me there’s a strategy here that goes beyond simply cashing the first check that someone writes. Aggregating all these assets into Orion looks more of a pre-IPO roll up than anything else.
After all, the bigger Orion gets under current ownership, the more impressed Wall Street will be when it’s finally time to sell. And in the meantime, the growth ramp keeps climbing.
TA Associates has deep pockets. They know it takes money to make big money and they’ve invested that money in Orion.
There’s zero desperation here and not even any real hunger. The biggest motivator I can see is old-fashioned ambition.
They want to build a giant. Go big or go home.
So let people talk. Orion is a consolidator, not an acquisition candidate at this time.
We’ll see plenty of TAMPs accept offers they can’t refuse in the next few years. Some will run out of money. Others will see the advantages of scale.
I suspect the buyers will ultimately start bidding good companies to bubble levels. That’s when you want to locate your exit. For now, the public TAMPs only sell at 4X revenue, which is on the far edge of normalcy in our world.
When AssetMark and Envestnet command double their current price, we’ll be in a bubble and everyone with a TAMP will want to cash out. That might be years away.