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Focus Closed 38 Deals in 2021, as It Eyes Further Growth Overseas

Focus Financial Partners said it closed a total 38 deals with registered investment advisor firms in 2021, including 14 partner firm acquisitions and 24 mergers. In the fourth quarter alone, the firm closed 22 deals, including nine partner firm acquisitions and 13 mergers.

On a call with analysts Thursday morning, CEO Rudy Adolf said the firm’s pipeline of deals continues to be strong in 2022, and that it is on track to achieve its targets laid out at its investor day in December. That’s when Focus said it expects to grow to 125 partner firms, from 84 currently, $4 billion in revenue, $1.1 billion in EBITDA and 28% margins.

Adolf said Thursday that while he expects some level of market volatility this year, Focus anticipates 20%-plus annual revenue and adjusted EBITDA growth, as well as adjusted EBITDA margin of 25.5% this year.

“The value of financial advice and longstanding client relationships provide a solid foundation for this outlook,” Adolf said. “We’re uniquely positioned in a multi-trillion-dollar global industry that is experiencing a transformational shift, driven by succession and the need for scale.”

Focus posted fourth quarter revenues of $523.9 million, up 38% year over year, beating analysts’ expectations by about $40 million. That was driven by $111.6 million in revenue growth from existing partner firms, the firm said. Fourth quarter non-GAAP earnings per share was $1.10, beating analysts’ expectations by 7 cents. Adjusted EBITDA was $129 million during the quarter, up about 42% from the prior year.

The fourth quarter organic revenue growth rate was 26.6% year over year.

Focus announced last week a new partnership with alternative investments platform CAIS, to bring a customized version of its platform to Focus’ partner firms.

On the earnings call, Adolf detailed the firm’s plans to grow internationally. The firm currently has a presence in Canada, the United Kingdom and Australia, and it will do more in those markets. But the firm will also move into new countries, he said.

Currently, international business accounts for just 5.8% of Focus’ revenue. But Adolf wants to get that to 20–25% over time, so it can get the real benefits of diversification.

“Our model and our value proposition—entrepreneurship, value-added services and permanent capital—is very unique in the U.S.,” Adolf said. “In these international markets, it’s simply unheard of. There’s consolidation, there’s regulatory change, there are a whole number of dynamics where markets are moving more toward a fiduciary model.

“This always creates tremendous opportunities because ultimately we know more about fiduciary wealth management on our scale than just about anybody else in the world,” he said. “That’s a major competitive advantage.”

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