Fisher Investments deal’s valuation in line with market

investmentnews.com:

After months of speculation, Fisher Investments said over the weekend it had sold up to 23.5% of the $275 billion registered investment advisor to a group of investors, and, after doing some quick math, market players and participants placed a valuation of the firm in neighborhood of 15.5 time EBITDA, or earnings before interest, taxes, depreciation and amortization.

EBITDA is an all-important cash flow metric that RIAs like Fisher Investments and buyers, including private equity funds, use to determine the price of an RIA acquisition. Fisher Investments on Sunday afternoon said that Advent International and a subsidiary of the Abu Dhabi Investment Authority agreed to make a minority investment the firm, controlled by noted investor and marketer Ken Fisher.

According to Fisher Investments, the deal to buy the minority stake in Fisher Investments values the firm at $12.75 billion. A rough valuation metric for a firm the size of Fisher Investments would work like this: 30 basis points on $275 billion of assets equals annual EBITDA, or $825 million. Multiply that by 15.5, and get the amount of $12.8 billion.

Paying 14 to 15 times EBITDA for an RIA firm the size and overall quality of Fisher Investments is in the realm of what the market is currently commanding, said senior market sources who spoke confidentially to InvestmentNews about the deal.

Those sources noted that price tag may be a bit high for a minority position in an RIA, but it was generally the going market rate for a large, well-managed advisory firm.

In the more than decade long boom times for RIA and broker-dealer mergers and acquisitions, valuations have soared, rising 50% – or more – for large RIA firms like Fisher Investments. Private equity managers