LMP bets big on retirement services with Definiti investment

The desire of many American employees to secure retirement funds, coupled with regulatory trends, attracted Lovell Minnick Partners – a Radnor, Pennsylvania, PE firm – to take a majority investment in Definiti, a retirement services company based in The Woodlands, Texas, earlier this month.

PE Hub caught up with Jason Barg, LMP partner, who detailed opportunities that the firm identified with Definiti. He described the company as a “trusted partner” for its clients, something that is key in establishing success in the retirement services space.

Definiti supports more than 8,000 workplace organizations and 10,000 retirement plans across the US, the company said. It’s a third-party administrator (TPA) that provides organizations with retirement plan administration, record keeping and compliance services, as well as actuarial consulting and pension outsourcing.

What interested LMP to make the investment is that Definiti provides complex services that are not easily replicated, Barg said. “Between the tailwinds of the market, plus the tailwinds for this specific company as one of the largest national TPA providers out there, we think that creates a really compelling investment opportunity for us.”

Among opportunities that LMP identified with this investment is the regulatory landscape for retirement savings that has a strong bipartisan consensus, Barg said.

The Secure 2.0 Act of 2022, signed by President Joe Biden end of last year, is one of the regulatory tools that encourages employees to save for retirement, facilitate access to retirement savings, and lower employers’ cost of offering and funding retirement savings plans, among other provisions.

The retirement services space is fragmented too. There are a couple of larger players on one hand, and then numerous smaller players on the other, a situation that Barg described as advantageous to their investment and the goal for consolidation. “It’s fruitful ground for acquisition strategies,” he said.

Organic growth, such as the ability to invest in the best technologies and investing in its own capabilities, can help Definiti “become a really attractive home for those smaller firms that are looking to partner with somebody larger,” Barg said.

He added that the M&A strategy will also work to expand the company’s geographic footprint. “This is a very relationship-oriented business, and having a local presence in different markets matters,” Barg noted.

Even as the economy faces lots of pressure, Barg said Definiti has a revenue model that is recurring and consistent, something that can help weather the financial storm. “Whether it [the economy] goes through down cycles and up cycles, people need to save for retirement.”