Thomas H. Lee bought RIAs before anyone else

Thomas H. Lee, a private investor who bought into the market for RIAs more than a decade ago, well before many of his competitors, died suddenly Thursday. He was 78.

According to the New York Post, which cited unnamed police sources, Lee committed suicide yesterday morning in his Manhattan office. He was found dead of a self-inflicted gunshot wound, according to the Post report.

He left Thomas H. Lee Partners in 2006 and later started Lee Equity Partners, which has made a handful of significant transactions in registered investment advisors and broker-dealers since then.

At his first firm, Lee’s most prominent deal was the 1992 purchase of Snapple Beverage Corp. After his firm bought Snapple for $135 million, investing only $28 million of its own money, Lee sold it to Quaker Oats Co. for $1.7 billion two years later, according to Bloomberg.

At his second, self-named private investment shop, Lee had a keen eye for wealth management firms. In 2012, Lee Equity Partners took Edelman Financial Group private, paying $8.85 per share in cash, a premium of 43% over Edelman Financial’s previous closing price, putting the price of the deal at around $265 million.

In the decade since the transaction for Edelman, the mergers and acquisitions market for RIAs and broker-dealers has grown greatly, in large part due to private equity managers like Lee looking to capture the 25% to 35% annual returns typically generated by many RIAs.

To put the RIA mergers and acquisitions boom into perspective, 75 private equity firms invested in the space in 2008 prior to the economic crash, according to Echelon Partners, an investment bank, a number that increased to more than 275 firms in 2021.

In 2015, private equity firm Hellman & Friedman said it had purchased a majority stake in Edelman Financial Services for an undisclosed amount from Lee Equity Partners. That firm eventually became Edelman Financial Engines.

“I extend my condolences to his family, and encourage anyone experiencing suicidal thoughts to dial 988 to reach the 988 Suicide and Crisis Lifeline,” Ric Edelman wrote in an email. Edelman is no longer part of the management team of Edelman Financial Engines.

Then in 2017, Lee Equity Partners invested in a broker-dealer aggregator, Atria Wealth Solutions, headed by former Morgan Stanley executive Doug Ketterer. Atria has made at least five broker-dealer acquisitions in the past five years and has 2,500 financial advisors working with more than $100 billion in client assets.

Lee Equity Partners also invested in 2021 in a San Diego RIA, Pure Financial Advisors, with $4.1 billion in client assets.

Meanwhile, Lee’s old firm, Thomas H. Lee, in 2017 bought out certain institutional investors who owned stakes in Hightower Advisors in a recapitalization. Hightower currently has $103.5 billion in client assets.

“The family is extremely saddened by Tom’s death,” a spokesperson for Lee’s family said in a statement.  “While the world knew him as one of the pioneers in the private equity business and a successful businessman, we knew him as a devoted husband, father, grandfather, sibling, friend and philanthropist who always put others’ needs before his own. Our hearts are broken.”