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AssetMark Makes First Acquisition Since Summer IPO

So begins a plan to gobble up TAMPs that can’t compete with it.

AssetMark announced Monday the first of what it hopes will be many acquisitions.

The turnkey asset management platform that went public in July reached an agreement to purchase OBS Financial, another TAMP with over $2 billion that provides investment strategies to over 300 advisors and bank trust officers. 

Canandaigua National Corporation, which sold OBS, is a financial services firm with subsidiaries that include commercial and personal banking, mortgage, trust, estate, investment, and insurance services. 

The all-cash transaction is expected to close in early 2020. Specific terms of the deal were not disclosed.

As of its first earnings presentation in August, assets with Concord, Calif.-based AssetMark grew to an all-time high of $56.1 billion. It is used by 7,900 advisors and approximately 155,300 investor households, excluding the advisors and assets that will come from the latest deal.

Shares of AssetMark (ticker: AMK) were 3.6% lower midday Tuesday at $25.11. Since going public, the stock has traded as low as $22.87 and as high as $29.37. 

Profits have been modest for the 23-year-old company but during the summer executives laid out a plan that pleased investors. AssetMark said it is actively seeking smaller, “sub-scale” TAMPs to buy.

“We’re able to pay a nice multiple for those sellers because often they aren’t making any money or very little. There may be some large deals out there and those might have some different economics. We are very interested in considering deals of all sizes,” AssetMark President and CEO Charles Goldman said during its first earnings call.

OBS Financial is an example of the former and the plan is to integrate it, where appropriate, to AssetMark’s systems and infrastructure, according to the company.

But, as AssetMark executives have pointed out, the company sees more in other TAMPs than their assets. “This acquisition will help us expand our base of independent advisors and our presence in the bank Trust market,” Michael Kim, the Chief Client Officer of AssetMark, said.

In addition to TAMPs, AssetMark has explored acquiring other types of companies to bolster is platform, expand its ancillary services to advisors, or consulting services. AssetMark has considered purchasing technology companies but has yet to do a deal with one.

“We have not found any that make sense to us strategically nor the price points. Often these deals are trading at very high multiples and we’re having trouble making sense of those multiples,” Goldman said.

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