RCAP Closes on Buy of First Allied

NEW YORK CITY-RCAP Holdings LLC, a holding company managed by Nicholas Schorsch, William Kahane, Michael Weil, Peter Budko and Brian Block, has closed on its previously announced acquisition of retail financial services company First Allied Holdings Inc. San Diego-based First Allied, including its Legend Group division, manages over $32 billion in assets for 300,000 clients nationwide.

First announced in June, the deal is in line with RCAP's aspiration to bolster its presence in the independent financial advisor segment of the financial services industry. “In 2007, my partners and I perceived an opportunity to build an open architected, wholesale broker/dealer to distribute best-in-class investment solutions,” Schorsch, chairman and CEO of RCAP, said in June. “We insisted that every investment product distributed by our wholesale broker/dealer, Realty Capital Securities, LLC, closely adhere to our best practices, namely: pay for performance, plain language reporting and full transparency, alignment of interests between investors and management, lower fees, routine valuations and regular liquidity events.”

In view of that, Schorsch said when the pending acquisition was first announced, the First Allied deal marked “another step forward” for RCAP. “We believe that the challenges and opportunities we witnessed in the wholesale distribution channel exist in the broader retail network as well, and we see value and opportunity for growth in a paradigm shift toward a sustainable direct relationship between the mass affluent investor and their independent financial advisor,” he said at the time.

The combination of RCAP and First Allied, Schorsch said Wednesday, “allows us to broaden our portfolio of financial companies to provide a fully integrated investment solution to the retail investor by delivering high quality investment solutions through the combination of both our wholesale broker-dealer and First Allied's extensive network of independent financial advisors,” which number some 1,500 operating out of 500 offices across the US. For its part, RCAP has raised more than $10 billion of equity capital to date.  

First Allied and its subsidiaries will continue to operate autonomously under their current management structure and respective brands. Further, they'll look to make substantial investments in technology and expanding staff now that the deal has closed.

Financial terms of the deal were not disclosed, although the website RIABiz reported in June that Schorsch had cited a $200-million initial investment to acquire and upgrade First Allied in an interview with InvestmentNews. As part of the transaction, private equity firm Lovell Minnick Partners sold its majority interest in First Allied, which it acquired in 2011.

When the sale to RCAP was first announced this past June, Robert Belke, managing partner at Lovell Minnick, commented that it reflected his company's belief that “a profitable exit from an investment makes sense when it brings together companies with complementary competencies. We believe the combined First Allied and RCAP Holdings businesses will be well-positioned to create substantial future value for all stakeholders."