In what is already a busy M&A market in North American wealth management, Pathstone made a big splash yesterday with its acquisition of a bi-coastal firm serving, amongst other clients, UHNW individuals.

(An earlier version of this item appeared on Family Wealth Report, sister news service to this one. The scale of the transaction, and the issues involved, must surely resonate internationally as well as domestically, so we hope readers value this story.)

Pathstone's drive to grow via acquisitions as well as organically was emphatically underscored yesterday by announcing that it has bought independent investment advisor Hall Capital ($45 billion assets under management). 

The deal, which takes AuM at Pathstone to almost $100 billion, is arguably the biggest M&A move in AuM terms this year. The move follows acquisitions earlier this year, such as Pathstone’s purchase in February of Colorado-based Crestone Capital.

Backers such as Kelso & Co, Lovell Minnick Partners and the management of Pathstone will invest fresh capital to support the Hall Capital transaction, the firm said yesterday in a statement. UBS Securities, LLC served as the financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Hall Capital. Ardea Partners LP served as the financial advisor and Alston & Bird LLP served as legal counsel to Pathstone.

The financial terms were not disclosed.

While the sharp rise in interest rates after the pandemic and other difficulties might have dampened the brisk M&A activity in wealth management in recent years, Pathstone appears on a continued upward growth trajectory.  

"While still very small compared to the larger wirehouses, it shows there is plenty of room for entrepreneurial spirit to thrive without the added pressure of the private equity recapitalisation cycle every five to seven years,” Allen Darby, CEO of Alaris Acquisitions, said in a note.

“It’s encouraging to witness transactions of this magnitude, as they demonstrate that liquidity is available for shareholders of these larger enterprises created in recent years. This not only paves the way for the next generation of firms aiming to replicate that success, but it also bodes well for shareholders of smaller firms with exceptional leadership and proven execution track records," Darby added.

30-year history
Founded in 1994 in San Francisco – with an office also in New York – Hall Capital provides advisory services to more than 130 ultra-high net worth families, endowments, and foundations. Among other qualities, the business says that women account for half of all its senior employees.

As a result of the deal, Pathstone's total assets under advisement and administration have reached nearly $160 billion. It will also grow its national footprint with a total of 23 offices and more than 750 team members. 

“We have been a long-time admirer of Hall as one of the most respected, long-standing firms in our industry and we believe that combining the best of our respective organisations creates a truly unique value proposition,” Matt Fleissig, CEO of Pathstone, said.

“Pathstone’s services are differentiated and serve as a natural complement to our research and portfolio management capabilities,” managing partners Eric Alt, Sarah Stein and Simon Krinsky said in a joint statement. “Each of our independent, solutions-oriented businesses have proved durable in the face of increasing competition.”

Purchases
Pathstone has inked several acquisitions in recent years. It acquired Rex Capital Advisors, a firm based in Providence, Rhode Island, in February last year. In December 2022, it combined with Willow Street, a Wyoming-based trust and fiduciary services firm, founded in 2005. In March 2021, for example, it joined up with RIA firm Cornerstone Capital Group. Cornerstone has expertise in sustainable and impact investing, adding to Pathstone’s work in this area.

(A news analysis of this transaction and wider trends is forthcoming from US correspondent Charles Paikert. Stay tuned. Here's one of his recent articles delving into the role of private equity and M&A, for example.)