Lightyear Capital loses Cetera auction to Genstar

  • Lightyear previously owned Cetera
  • Genstar paying $1.7 bln for majority of Cetera: sources
  • Final bidders include Lightyear, Reverence, Warburg, Lovell + Parthenon

Genstar Capital won the Cetera Financial Group auction, outbidding Lightyear Capital, which was long considered a shoo-in to snare the financial-advisory network.

Cetera said July 18 that Genstar agreed to buy a majority of its holding company, Aretec Group. The deal was valued at $1.7 billion, people said. Cetera’s leadership team will retain a stake.

The announcement ended a highly publicized auction dominated by private equity. Cetera is the El Segundo, California, network of nearly 8,000 financial advisers. The broker-dealer went up for sale in May, Buyouts reported.

Even before Cetera went on the block, Lightyear was expected win the auction. That’s because the New York buyout shop previously owned Cetera. Lightyear sold Cetera in 2014 for $1.15 billion to RCS Capital Corp, Buyouts reported.

Final offers were due at the beginning of July. Lightyear was one of several final bidders for Cetera, along with Reverence Capital Partners, Warburg Pincus, and Lovell Minnick Partners, which partnered with Parthenon Capital, sources said.

Genstar beat out Lightyear, and everyone else, because its offer was higher, sources said. Advisor Group, a Lightyear portfolio company, also didn’t want to be part of a “big merged group,” one of the sources said.

Cetera is composed of six broker-dealers: Summit Brokerage Services; Cetera Advisors; First Allied; Cetera Advisor Networks; Cetera Financial Specialists and Cetera Financial Institutions.

“At the end of the day, Genstar did the most,” the source said.

Founded in 1988, Genstar invests in middle-market companies. Sectors of interest include financial services, healthcare, industrial technology and software.

On the same day it announced its buy of Cetera, Genstar said it would acquire CRF Health from Vitruvian Partners.

Genstar is investing out of its eighth flagship, which last year closed on $3.1 billion and another $650 million of overage capacity.

Genstar, along with Aquiline Capital Partners, recently put Ascensus up for sale. The retirement-plan provider may fetch $2.25 billion, Buyouts reported.

Goldman Sachs advised Cetera on the process, while UBS Investment Bank and Deutsche Bank Securities provided financial advice to Genstar.

Skadden, Arps, Slate, Meagher & Flom was Cetera’s attorney, while Jeffrey Poss and Manuel Miranda of Willkie Farr & Gallagher served as legal counsel to Genstar.

Cetera, Lightyear, Genstar, Lovell Minnick, Goldman and Warburg declined comment. Executives for Parthenon could not be reached for comment.

Action Item: Contact Cetera CEO Robert Moore at +1 866-489-3100