Four years after Harbourfront Wealth Group announced an initial investment by Audax Private Equity, it’s welcoming a strategic investment from another Boston-based private equity firm, Berkshire Partners.
The Berkshire investment values Harbourfront at nearly $1.8 billion and is expected to close in the second half of the year. The amount of the investment and size of the stake was not disclosed.
Shareholders, which include employees and advisors, will see a “material return,” the company said in a press release.
“Welcoming Berkshire Partners while continuing our partnership with Audax provides validation that Harbourfront has built one of the strongest independent wealth platforms in Canada,” said Danny Popescu, Harbourfront’s founder and executive chair, in the release. “We’re pleased that we can reward our advisors through a partial liquidity event while giving them the ability to continue to grow their rollover equity.”
Richard McIntyre, who joined Harbourfront as CEO in April, said it’s significant that Audax will remain an investor.
“I think the fact that Audax is staying in the deal, is a real testimony to their belief in the model, the leadership team, our advisor base, the future,” McIntyre said in an interview. “They’re a great group of people who provide a ton of value to Harbourfront.”
Harbourfront has made five acquisitions in the past three years, its most recent one earlier this month. Over that period, its assets under administration has grown more than five-fold to top $22 billion.
In an April interview, Popescu attributed the firm’s growth to the liquidity events that come with private equity investment. Private equity firms typically exit their investments after five to seven years.
McIntyre said there was a lot of interest in Harbourfront from potential new partners, discussions that started before he joined the firm in April.
“I think it’s quite a unique business based on how it’s growing, the quality of advisor base, the speed at which we’re evolving and innovating, and so there was definitely a process where many private equity firms tried to talk to us about opportunities,” he said.
Berkshire’s group is “very knowledgeable about the space” and brings a successful track record, he added.
“Canada’s wealth management landscape is undergoing a fundamental shift toward independence, transparency, and advisor-led growth,” said Dave Bordeau, managing director at Berkshire Partners, in a release. “Harbourfront sits at the centre of this transformation, and our partnership reflects our deep conviction in the management team, the strength of Harbourfront’s advisory teams and employees, and the long-term opportunity ahead.”
McIntyre said Harbourfront sees opportunity for continued growth as other firms struggle with “huge decisions” around technology and other areas of investment, while at the same time having limited financial and human capital.
“The firms that we have partnered with to date have really benefited from that bigger scale, but also the ability to execute in their business well,” he said. “They can maintain their client relationships, their brand and I think this is a really unique kind of opportunity we have in Canada, so we see [ourselves] doing a lot more of those types of deals.”