Mid Atlantic sells to Parthenon, Waterfall Asset Management

Mid Atlantic Capital Group, the trust company that’s more than 35 years old, has found a buyer in Parthenon Capital Partners and Waterfall Asset Management.

Mid Atlantic announced the sale March 14. It did not provide financial terms or how much Parthenon would own. The middle-market private equity firm is buying a majority of Mid Atlantic, while Waterfall is getting a small stake, a source said. The deal is valued at $240 million to $250 million, a second person said.

The transaction still needs regulatory approval, including the okay from South Dakota Division of Banking. It is slated to close in Q3.

News of the Mid Atlantic sale was reported by Buyouts last month.

Founded in 1982, Mid Atlantic offers custody, brokerage, trade processing and financial services to the financial-planning community, including advisers, benefits administrators and financial institutions. It has assets under custody or administration of about $90 billion. The Pittsburgh company acquired Institutional Trading Services LLC in 2015.

Mid Atlantic’s management team, including Executive Chairman Charles Warden, CEO Paul Schneider, and Tim Friday, group CEO, are investing in the deal and staying in place. They will continue to lead Mid Atlantic day to day.

John Moody, an industry expert, is also investing and will be CEO of the holding company that owns Mid Atlantic, sources said. The unnamed holding company will acquire “additional, complimentary” businesses, a statement said.

Moody is co-founder and former co-president of Matrix Financial Solutions, which was sold to Broadridge Financial Solutions in 2011. Parthenon has previously partnered with Moody to buy fintech companies.

Brendan Ryan led a Raymond James deal team, which included Garrett DeNinno, Rick Durkes and Christian Clifford, that provided financial advice to Mid Atlantic. The process was not an auction but rather targeted discussions with a small group of potential buyers, a person said.

Founded in 1998, Parthenon targets middle-market companies in financial, healthcare and business services. The buyout shop is investing out of its fifth flagship fund, which closed at its $1 billion hard cap in 2016.

In December, Parthenon agreed to sell Cayan, a payments company, for $1.05 billion. Parthenon has put Abeo, a specialized anesthesia revenue-cycle-management firm it created about a decade ago, up for sale, Buyouts said. Houlihan Lokey is advising.

Waterfall, a New York hedge fund, had about $6.08 billion in assets under management as of Sept. 30.

In December, Waterfall hired Gene Weil and John Nelligan, cofounders of Milestone Advisors and former Houlihan Lokey FIG bankers, to launch a financial services/specialty finance PE platform. Waterfall Milestone provides flexible equity to middle-market financial services companies. Nelligan was involved in the Waterfall transaction, the source said.

Raymond James is a well-known adviser in the fintech space. Including the Mid Atlantic transaction, the investment bank clinched three deals this week. Raymond James advised DiscoverOrg, which sold a stake to Carlyle Group and 22C Capital. The investment bank also provided financial advice to Confluence, which sold to TA Associates.

Robert Zinn, Megan Wotherspoon, David Ehrenwerth and Todd Gibson of K&L Gates served as legal counsel to Mid Atlantic, while Shelly Hirschtritt, Joydeep Dasmunshi, Amy Peters and Jeffrey Seifman of Kirkland & Ellis advised Parthenon. Kramer Levin provided legal advice to Waterfall.

Parthenon, Waterfall and Mid Atlantic could not be reached for comment.

Action Item: For more information contact Mid Atlantic CEO Paul Schneider at +1 412-391-7077

People walk past a partially frozen waterfall in Bradgate Park in Newtown Linford, Britain March 2, 2018.  REUTERS/Darren Staples