Janney Montgomery Scott Sold in Major PE Deal

Private equity is hungry, and wealth management is on the menu. Investment funds managed by PE firm KKR have agreed to acquire the $150 billion wealth manager Janney Montgomery Scott from the Penn Mutual Life Insurance Company, marking another major equity deal in a busy year for the industry. 

Once finalized, Janney will become a standalone private company and continue to operate independently, according to a release. Terms of the deal were not disclosed.

KKR’s investment is being made primarily through its North America Fund XIII, and the company said it will support the nearly-200-year-old firm in creating a broad-based equity ownership program, available for all of its 2,300 employees.

Pretty Big Deal

The KKR deal is just the latest example of PE diving into the wealth management space. In June, private equity was the financial backing for 95% of the month’s wealth management M&A transactions, spanning 96% of that month’s purchased assets, according to Fidelity:

• Earlier this month, Bain Capital, one of the largest PE firms in the world, announced it will buy wealth management software company Envestnet in a deal valued at $4.5 billion. 
• In April, Clearstead Advisors — an RIA backed by PE Flexpoint Ford — acquired the assets of Norfolk, Virginia-based Wilbanks Smith and Thomas Asset Management, a wealth and investment management firm with over $5 billion in AUM.

Feed the Beast: PE’s approach toward wealth management has been viewed as a mixed bag by industry experts. Advisory firms told Barron’s the industry’s presence has helped by professionalizing their firms, enhancing governance, and providing the capital necessary to grow. But PE ownership runs the risk of cost-cutting during poor market conditions, and even Taylor Swift (the unofficial queen of capitalism) had a problem with the industry after a PE firm bought up the masters to her first six albums. Can’t wait for the single to drop.