Recent Deal Making Raises Question: What is Wells Fargo Advisors Worth?
From the Desk of Jim Eccleston at Eccleston Law:
Deal-making in the wealth management industry continued this week as The Tiedemann Group and Alvarium Investments have agreed to merge with Cartesian Growth Corp. to create a new firm.
However, the company will be listed on Nasdaq as Cartesian due to its status as a special purpose acquisition company (SPAC). The SPAC, which has been tabbed as a faster and cheaper alternative to the IPO since the outset of COVID-19, will enable the newly created firm to oversee $54 billion in client assets.
The agreement begs the question of how much Wells Fargo Advisors could potentially be worth on the market. One must consider the currently heightened demand for wealth manages as well as Sen. Elizabeth Warren’s recent proposal that the Federal Reserve break up Wells Fargo.
Charlie Scharf, Wells Fargo’s new CEO, has already initiated a reorganization of the firm as the company sold its asset management business earlier this year for $2.1 billion. According to bankers and competing executives, a potential sale of Wells Fargo Advisors should generate ample demand on the market from private equity firms and other broker-dealers. Wells Fargo employs 12,819 advisors who earn average annual revenue of $1.08 million, which equates to $13.8 billion in annual revenue for the wealth management business. Wells Fargo Advisors earns annual pre-tax profits of $2.76 billion if 20% margins are assumed. Add on a valuation of eight times EBITDA, which provides that Wells Fargo Advisors may be worth $22.1 billion or more.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.
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