Rumors have been circulating for years that Envestnet has run out of vision and top management is looking for relief from the pressures and constraints of running a public company.
I'm not convinced. And from the recent quarterly conference call, I'm not sure CEO Bill Crager (not incidentally a founder as well) is eager to sell either.
Of course he was extremely careful not to comment on speculation. If any kind of exploratory talks with private equity firms are on the table, he owes it to his shareholders to respect the process and weigh any proposal fairly.
But if you'll recall, BlackRock has a strategic 5% stake in Envestnet that they'll be reluctant to unwind unless the offer is truly lavish.
This isn't simply a passive investment in the biggest TAMP as far as the biggest asset manager is concerned. This is about maintaining a seat in one of the most exciting distribution platforms around.
As long as Envestnet remains public, that 5% stake is enough to keep the door open for a deeper relationship down the road . . . if that's what BlackRock decides it wants. Going private would eliminate a lot of that flexibility, forcing tough decisions and tougher negotiations.
Sure, it could happen. But this just isn't the kind of institutional relationship where managers look at where the stock has gone and decide whether an exit makes sense on a pure return basis.
And on the flip side, Envestnet has expanded its platform over the years by using its stock as currency. Taking that currency out of play forces management to fund future deals with cash.
Private equity isn't historically fond of leaving a lot of cash sloshing around in portfolio companies. Unless the theoretical takeout firm had a strong vision for an enlarged Envestnet, they're not likely to adopt an open checkbook policy.
Who has a stronger vision for Envestnet than the people running it now? Admittedly, the stock hasn't gone far in four years, but they haven't put the firm on the block yet.
Unless they've suddenly run out of plans, that hasn't changed. It's a target-rich environment for acquisitions and Crager seemed as energized as ever on the call.
He considers himself the leader in the TAMP industry as well as the hub of the financial planning universe. That success has come through bolting a lot of once-independent companies together while paying attention to internal R&D.
Now he's eager to continue the work of integrating the pieces into a platform that leverages its advisory audience across a wider solution mix. In other words, uptake is important.
He wants deeper relationships adding value at every link in the industry chain: for advisors and for the clients. More successful clients mean more successful advisors, and that ultimately feeds a stronger Envestnet.
That doesn't sound like someone who's run out of ideas. It sounds like someone who is eager to write at least one more chapter with the team he's built.
And it's a sprawling platform. It's going to take time. As the analysts on the call noted, private equity will want to cut costs, raise prices and take on debt. That's their win.
Crager sounds like he is still focused on expansion. That's a very different goal.
One funny detail: the UBS analyst who follows the company has been needling Crager for "acting like a private company" already. To hear Crager tell it, there's no inherent advantage to taking Envestnet off the market.
He doesn't quite have an open checkbook, but he wouldn't have one in a private equity environment either. And I doubt the regulatory environment would become more open for him if the stock was retired.
Envestnet isn't likely to buy other TAMPs either way. They aren't a roll-up operation.
They bolt unique solutions together and find ways to integrate the success stories into a larger whole. From that perspective, the question isn't really when Crager will sell the company.
It's what he'll find to buy or build next.
