The wealth management division of a major accounting firm that received a private equity investment earlier this year will become a registered investment advisor owned by that investor.
Backed by Parthenon Capital Choreo has agreed to acquire Cherry Bekaert Wealth Management75-year-old accounting firm Cherry Bekaert, a Richmond, Va.-based RIA with nearly $1 billion in client assets, firms said November 16. Choreo was spun off from accounting giant RSM earlier this year as a standalone company and its acquisition of Cherry Bekaert second billion dollar deal this month. The deal shows how CPAs and other tax professionals have come into focus many recent wealth management deals.
At the closing, which is expected at the end of the year for an undisclosed amount, Choreo and Cherry Bekaert Advisory will enter into a strategic partnership that will allow the recipient to operate from the accounting firm’s offices on a permanent basis, Cherry Bekaert Wealth interim CEO Brooks Nelson and Choreo CEO Larry Miles said in an interview. Currently, Cherry Bekaert Wealth’s six financial advisors and about half a dozen other employees allow the accounting firm to offer wealth management in just four of its 25 offices.
“We plan to be in all of these offices in the coming years,” Miles said. “We think we can do the best work by working together.”
According to Miles, Choreo will pay a portion of the purchase price to Cherry Bekaert Wealth shareholders in the form of stock in the acquiring firm. Since the Parthenon invested In June, the deal for the accounting firm’s wealth division at Cherry Bekaert will combine the two companies with common ownership. After closing, Choreo will have $14.5 billion in client assets.
“Culturally, it’s a very comfortable fit and it makes perfect sense to connect with Choreo,” Nelson said. “We can better serve our customers and grow faster.”
Rod Butin, principal consultant at consulting firm FP Transitions, said many sellers prefer liquid assets, such as cash in the buying firm, because the units involved in the transaction are a “tax realization event.” Sellers accepting shares from buyers should ensure they have enough liquidity to cover the hit or consider tax-efficient means of investing in the buying firm, Butin said in an email. Regarding the merger of two firms under one sole owner, he said investors often decide that the potential benefits of the combination outweigh any technical challenges of the new facility.
“People are more powerful than technology,” Boutin said. “The alignment of sales, service and investment cultures so that clients feel served and advisors feel empowered is the cornerstone of a successful integration.”
As a wealth management firm with tax expertise, Choreo competes with companies like Avantax that seek to work with CPAs or registered agents with investment advisory expertise. Avantax’s parent company, Blucora, is selling tax software firm TaxAct 720 million dollars by the end of the yearthe owner of the wealth management company takes its name and conducts business solely as tax-focused investment advisor. Avantax’s emerging M&A arm, Avantax Planning Partners, gives it the ability to serve as an outsourced wealth management tool for CPA firms or as a succession plan for the firm’s existing advisors. After making 20 transactions Avantax Planning has 36 consultants and $7 billion in client assets in 20 months.
“One of the most important things for advisors is flexibility,” Avantax President Todd McKay said in an email. “Each transaction is unique, but they all emphasize consistency in serving end customers.”