The wealth management arm of a major accounting firm that received a private equity investment earlier this year is folding into a registered investment advisor owned by the same investor.
Parthenon Capital-backed
Upon the expected close at the end of the year at an undisclosed amount, Choreo and Cherry Bekaert Advisory will enter into a strategic partnership enabling the incoming acquirer to operate from the accounting firm's offices on an ongoing basis, Cherry Bekaert Wealth interim CEO Brooks Nelson and Choreo CEO Larry Miles said in an interview. Currently, the six financial advisors and roughly a half dozen other employees of Cherry Bekaert Wealth enable the accounting firm to offer wealth management in just four of its 25 offices.
"We plan to be in all of those offices in coming years," Miles said. "We think we can do the best job possible working together."
Choreo is paying a portion of the purchase price in the form of stock in the acquiring firm to the shareholders of Cherry Bekaert Wealth, according to Miles. Since Parthenon
"It's a very comfortable fit from a cultural perspective, and it makes all the sense in the world to join with Choreo," Nelson said. "We can serve our clients better and grow faster."
Most sellers tend to prefer liquid assets such as cash over stock in the acquiring firm, since the units involved in the transaction are "a tax-realization event," according to Rod Boutin, the general counsel of consulting firm FP Transitions. Sellers who accept stock from buyers should ensure they have enough liquidity to cover the hit or consider more tax efficient means of investing in the acquiring firm, Boutin said in an email. Regarding the merger of two firms under the same private equity owner, he said that investors often decide that the potential advantages of the combination surpass any technical challenges of the new setup.
"Personnel is more compelling than technology," Boutin said. "Matching cultures in sales, service and investment so that clients feel served and advisors feel empowered is the fulcrum point to a successful merger."
As a wealth management firm with tax expertise, Choreo is competing against companies like Avantax that also seek to work with CPAs or enrolled agents with investment advisory practices. When Avantax's parent firm, Blucora, sells tax software firm TaxAct
"One of the most important things to advisors is flexibility," Avantax President Todd Mackay said in an email. "Every transaction is unique, but they all stress consistency of service to end clients."
