Envestnet confirmed Thursday that it had entered into an agreement to be bought by Bain Capital in a transaction valuing the company at $4.5 billion — $3.5 billion in equity and $1.0 billion in debt.
The news ended years of speculation about the financial technology firm's future, brought to a head in April by reports that the firm had hired Morgan Stanley to speak with potential buyers. Now, the details of deal have been confirmed, including the decision by BlackRock, Fidelity, Franklin Templeton, State Street and Reverence Capital to become minority shareholders.
"Bain is not coming in here to cut," said Tom Sipp, Envestnet's executive vice president of business lines, in an interview Thursday. "They want to invest and continue to expand our market-leading position. There are many private equity transactions out there where it is more about cutting cost and restructuring. This isn't like that. It's about leaning into the strategy."
Sipp said another important issue with this deal is the fact that "not all private equity is the same," and he argued that it's important to not lump all of the increasingly common PE transactions in the wealth management space into the same bucket.
Phil Loughlin, a partner at Bain who worked on the deal, seems to agree. "We like where they're positioned, their strategy, and aren't seeking radical changes in direction of vision, but we think we can [be] purposeful in prioritizing and resourcing to accelerate change," Loughlin said in an interview Thursday with Bloomberg.
Some industry observers have interpreted the sale as a sign of big challenges facing Envestnet, arguing the firm needs to "right the ship" by paying down debt and more fully integrating its many acquired businesses and capabilities.
But Sipp — along Molly Weiss, chief product officer for wealthtech and solutions, and Dana D'Auria, group president of Envestnet Solutions and co-chief investment officer — insist this framing misses the bigger picture. Envestnet is already a market leader in key segments of the wealth management industry, they said in a joint interview, and the new backing by Bain should give the firm new resources and flexibility to achieve its integration and growth goals.
The trio each gave their respective views of how Envestnet will benefit from the new ownership structure, emphasizing that Bain is coming to the table to support the firm, not disrupt its longstanding strategy.
A 'Monumental Day'
"This is a monumental day for Envestnet," Sipp said. "We are entering the next chapter for the company with the best partners we could possibly have. Bain thinks very long term, and they're very strategic. Plus, they bring experts to the table that will be very, very helpful to make us better and deliver faster on our vision."
Sipp pointed to the strategic backing from BlackRock, Fidelity, Franklin Templeton and State Street as "a stamp of approval" for Envestnet's strategy. He noted that Reverence Capital's support of Bain in the deal as a minority backer will also bring key insights and expertise to the table.
"When you combine the new backing with the fact that we will be private, it's a really big deal," Sipp continued. "It allows us to get out of the focus on the quarterly earnings cycle and to be truly strategic about how we proceed for the long term."
(The firm's stock traded down slightly Thursday, the day of the announcement, and while the stock price is up about 24% in 2024, it is down more than 15% from five years ago.)
Asked whether he expects any big changes in the firm's strategy under Bain's leadership, Sipp said the answer is a clear "no." There will naturally be some changes as the ownership transition unfolds, and there will be new efficiencies and automations, he said, but the core of the strategy is clear to everyone.
