West L.A.’s B. Riley Financial Inc. has purchased Wunderlich Securities for $67 million in cash and stock options.
The deal, announced last week, bolsters B. Riley’s existing business lines, which include investment banking, brokerage, and research services. It also gives the firm a real foothold in consumer-facing wealth management, expanding its assets under management in that sector from just $1 billion to $11 billion. More than 200 financial advisers, who collectively manage some 37,000 accounts, are set to join B. Riley’s roster as part of the deal.
The Wunderlich purchase is the second large transaction for B. Riley in the past two months. It follows a March acquisition of FBR & Co. for $160 million. The two deals push B. Riley’s revenue for the trailing 12-month period from March 31 north of $450 million. Wunderlich generated about $117 million in revenue during that time.
Bryant Riley, B. Riley’s chief executive, said the deals are part of an attempt to further diversify the business after the 2014 purchase of Great American Group Inc. provided a larger-than-expected windfall over the past two years.
“A lot changed in 2014 when we brought in Great American, which was very timely and worked out very well,” Riley said. “As we integrated, we realized where other opportunities were and leveraged (the Great American) business to focus on the brokerage business, which we think is a little distressed right now.”
Even with that assessment, Riley said the industry is due for a rebound.
“Our basic thesis is that not everyone is going to do everything on an online platform and passive investing is overrated,” he said. “You can’t just pick a random bucket of stocks without any advice and expect success.”
Both the Wunderlich and FBR deals were the product of back-and-forth between the companies’ respective leaders, all of whom have dozens of years of small-cap financial industry expertise, according to Riley. Both Wunderlich Chief Executive Gary Wunderlich and FBR Chief Executive Richard Hendrix have stayed on to pilot divisions within B. Riley.
“We’ve all been through the trenches, so to speak, and managed to get out the other side,” Riley said. “We work really well together.”
The real key to the deals, however, was the complimentary nature of the businesses. Riley said due diligence leading up to both acquisitions showed little client or business unit overlap with FBR and Wunderlich. For example, just 7 percent of brokerage commission fees overlapped in FBR’s case.
Riley said he’s still somewhat taken aback by the growth of the firm, but he doesn’t have much time to revel in it.
“We’ve been very fortunate,” he said.
Wachtell Lipton Rosen & Katz acted as legal counsel to B. Riley. Baker Donelson attorneys represented Wunderlich, which received financial advice from Keefe Bruyette & Woods Inc.
