John Langston is the founder and managing partner of Republic Capital Group. John is a Certified Mergers and Acquisitions Analyst and a Chartered Alternative Investments Analyst. He has over 15 years of experience in M&A and the investment management industry and has held leadership roles in multiple wealth and asset management firms.
Russ Alan Prince: Tell us a bit about Republic Capital Group and what services you provide.
John Langston: Republic Capital Group specializes in serving the wealth and asset management space with investment banking services through advising on the selling, buying, merger and capitalization through debt and equity and succession planning for firms. Based on our research of publicly available information, in 2022, we were a leading firm in transacting wealth management assets within the space.
The firm began over 10 years ago as part of a large RIA that was backed by one of the largest private equity firms in the world. Two years later, I amicably lifted out to build what Republic Capital Group is today.
Today, our leadership team of myself, Peter Nesvold and Vic Escalamdo represent one of the most experienced leadership teams in the space, with each of us having engaged with hundreds of firms and being involved in some of the largest and most complex transactions in wealth management. We have built a firm and culture focused on producing outcomes for clients who are larger wealth management firms and helping them accomplish significant transactions.
Prince: What is your current outlook for wealth management M&A activity?
Langston: We have been saying for months that we are not seeing a slowdown in deal activity. What we are seeing in real-time through the direct work we are doing for our clients, is actually a surge of firms, even following the market correction, electing to explore partnering with a larger firm or selling. At Republic Capital, we don’t allow broader data trends to shape our view or dictate our approach with clients, instead, we focus on the transactions and outcomes for our clients giving us first-party market perspectives.
For example, in investment banking, strategy and specific circumstances have a significant impact on the outcome. The speculation in the press that multiples and deals would be down, is resulting in a big variability in the offers clients are receiving. It is eye-opening when you get an offer 20% below the other offers and one that is 20% above everyone else.
In terms of our outlook, at this time, firms have significant control over what outcome they can achieve from joining a larger firm or taking in an investor. If we do see a slowdown, we don’t feel it will be as much market driven as it will be a reaction to predictions of a slowdown and firms electing to pursue a deal. The options and rationale for transactions are greater than ever.
Prince: What are some of the trends you have been seeing in the M&A space as of late?
Langston: This is the best time ever for a $3 billion to $10 billion firm to compete for acquisitions. We are seeing the largest supply of sellers in the last five years. To be clear, the demand still exceeds supply, but large aggregators now have the opportunity to be more selective and pass on lower-quality firms or those with a less-than-ideal fit.
We are also seeing many firms who have received pitches from large aggregators passing. Regional firms are the ones benefiting right now and that is where the true opportunities lie. Being a larger part of a regional firm is appealing if it is the right fit. We are also seeing some increase in the amounts and time involved in earn-outs. It’s important to know that this is being driven by sellers in some cases who want more time to hit growth goals or recoup some value lost through market decline.
Prince: There is a lot of talk about cultural fit when companies are making a transaction. Can you elaborate on this?
Langston: Cultural fit is vital to the long-term success of a merger. Perhaps where I have a different perspective than some, is how to evaluate the potential of two firms and bring the cultures together over time.
For example, I believe that culture, which is typically a few core values that really help center an organization over time, in some respects never changes. The compatibility of missions is also a big factor to consider. If the shared mission is strong enough, I believe in some cases, culture can evolve and grow over time. Too often it seems some firms are looking for their twin in the marketplace, only focusing on shared values and mission to dictate whether or not a firm is a cultural fit, overlooking the value some differences could bring.
Russ Alan Princeis the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He consults with family offices, the wealthy, fast-tracking entrepreneurs and select professionals.
