Raymond James Financial has agreed to buy Financo, a boutique investment bank that advises on middle-market consumer transactions.
Financial terms weren’t announced. Founded in 1971 by Gilbert Harrison, Financo was once known for its fashion and apparel deal-making. The firm, starting in 2014, shifted its focus to beauty and personal care, as well as e-commerce and healthy living, which now make up a majority of Financo’s business, CEO John Berg said. Clients include DevaCurl, Drunk Elephant, and TOMS. Financo typically advises on deals valued at $100 million to $2 billion.
Thirty Financo professionals are joining
(ticker: RJF) consumer and retail investment banking. Berg will lead the combined consumer and retail practice. The deal is expected to close in Raymond James’s fiscal second quarter, which ends in March.
“As the consumer and retail spaces undergo significant shifts in business models and shopping behavior, we see tremendous growth opportunity for M&A and growth capital-raising in the space, which are Financo’s main areas of expertise,” Jim Bunn, president of Raymond James global equities and investment banking, said in the statement.
The sale comes eight years after Berg acquired control of Financo. In 2012, Harrison, then Financo’s chairman and chief executive, brought in Berg, a private-equity executive and former investment banker, who took over as CEO. Harrison stayed on as chairman of Financo until 2017 when he retired.
“I founded Financo in 1971 because I saw a need for an independent financial advisory firm servicing not only consumer and retail brands but also other small and family owned businesses,” Harrison said in an interview. “I am saddened to see Financo will no longer be an independent firm. Raymond James is inheriting some tremendous professionals who have worked for me for many years.”
The Financo sale wasn’t a result of the decline of the retail sector, Berg said. Fashion and apparel once constituted 85% of Financo’s business but that has dropped to less than 15%, he said.
Financo has quadrupled its revenue since 2012, Berg said. The New York firm advised on nearly 20 transactions in 2019, according to its website. This year, Financo will end up working on fewer deals but “we’re doing bigger and more-substantial transactions, so revenue will be up,” Berg said. Transactions in 2020 include the sale of Olaplex to Advent International,
Helen of Troy
buying Drybar, and Main Post Partners investment in Dr. Dennis Gross Skincare.
Financo wasn’t looking for a buyer but was approached several times. “I always said no,” Berg said.
Raymond James aggressively pursued Financo earlier this year, during the first quarter, and Berg declined those overtures. The advent of Covid-19 in March made the world more unsure and discussions reignited over the summer, Berg said. Financo tapped Jon Hemmert of Keefe, Bruyette & Wood to advise on a deal.
The sale to Raymond James gives Financo access to products and services it doesn’t have, such as IPOs and equity capital market capabilities, including secondary and debt offerings, as well as a full restructuring practice, Berg said. “Having a big brother that has resources that they are willing to deploy to make [Financo] grow faster and make us grow our market position, I’m all in on that.”
The Financo sale isn’t a defensive move, he said. Retail is changing and this is expected to produce more opportunities. Strategic companies will need to buy businesses to expand their capabilities, and for access to new demographics or new products and services, he said. Change “leads to more transactions, to more business. Change is good.”
The deal is the latest for Raymond James, a financial services company with $923 billion in total client assets. Earlier this week, Raymond James agreed to buy NWPS Holdings, a provider of plan administration, consulting and actuarial services.
Write to Luisa Beltran at [email protected]