After months of speculation, Cetera Financial Group, the second largest independent broker-dealer in the nation, has agreed to sell a majority stake of its business to private equity firm Genstar Capital, with Cetera’s leadership team maintaining “a meaningful ownership position,” the company said. The transaction is subject to regulatory approval and is expected to close in the late third quarter of 2018. Terms of the deal were not disclosed.
Cetera network of six independent broker-dealer firms is comprised of Cetera Advisors, First Allied Securities, Brokerage Services, Cetera Advisor Networks, Cetera Financial Institutions, and Cetera Financial Specialists.
Going forward, Cetera will continue to operate under a multi-affiliation structure, through two channels – traditional and specialty – that will serve independent advisor businesses and financial institutions.
“Working alongside Genstar, our entire organization will continue to serve our advisor community by advancing our Advice-Centric Experience, which envisions a profession driven by high-caliber, planning-based advice for clients,” said Robert “RJ” Moore, CEO of Cetera. “This is a unique time in our profession, when the need and desire for financial advice is at its greatest. We believe there continues to be significant opportunities for Cetera to be a compelling leader in the delivery of that advice.”
In addition to Moore, the new board will include Genstar managing partner Tony Salewski and vice president Sid Ramakrishnan, as well as Ben Brigeman, former executive vice president for Charles Schwab & Co., and Hal Strong, former vice chairman of Russell Investments.
Earlier this year, Bloomberg and other industry publications reported that Cetera was exploring a potential sale that could command up to $1.5 billion and had tapped investment banks to explore its options.
In February, Cetera disclosed a capital structure review and confirmed the retention of Goldman Sachs & Co. LLC to support the review process. At the time, the company said that the objective of the review was to optimize its capital structure, lower costs, and maximize continued investments.
Cetera became an independent, privately held organization following the pre-planned bankruptcy of its former parent company, RCS Capital Corp in 2016. Moore took over as chief executive officer in September 2016 after the departure of Larry Roth, who saw Cetera through the bankruptcy process.
RCS Capital was hit hard after it was revealed in October 2014 that American Realty Capital Properties, another company controlled by RCAP founder Nicholas Schorsch, intentionally left a $23 million accounting error uncorrected. The bankruptcy terms included a recapitalization by RCS Capital’s first and second lien lenders.
Genstar Capital is based in San Francisco and has approximately $10 billion in assets under management and targets investments focused on targeted segments of the financial services, industrial technology, healthcare and software industries.
Cetera is the nation’s second-largest independent financial advisor network with nearly 8,000 advisors, as well as a retail service provider to the investment programs of banks and credit unions.