Corridor Charts New Path for PE EP Wealth Acquires $1B Utah Firm
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OCTOBER 12, 2020 LOS ANGELES BUSINESS JOURNAL 15 DEALS & DEALMAKERS James B. Cutchin | [email protected] Corridor Charts New Path for PE Wilshire Firm puts focus on tech for a Japanese trading company. He eventu- ally left for graduate school where he first Associates to help boost businesses learned about private equity. “I looked at this as the American version By JAMES B. CUTCHIN Staff Reporter of the Japanese trading company,” he said. “I to be Sold wanted to bring the best of both worlds. … espite its sometimes opaque and That became the inspiration for my business Company founder Tito immutable image, private equity is a career.” D constantly evolving field. One of the early differences Enenstein will retire as chief executive From its early days dominated by buyout noticed between the Japanese and American shops looking to cut expenses at any cost models was the latter’s strong transactional By JAMES B. CUTCHIN Staff Reporter to the operationally focused world of today, focus. private equity has undergone major shifts For much of private equity’s early history, Santa Monica-based technology and advi- throughout its roughly half-century history. American firms were primarily focused on sory company Wilshire Associates Inc. has Now Craig Enenstein, founder of buying and selling companies, according to agreed to be acquired by two New York-based Sawtelle-based Corridor Capital, says the Enenstein, with little attention paid to oper- private equity firms. industry is entering a new technology-driven ational improvement opportunities within CC Capital Partners, a five-year-old firm era, underpinned not necessarily by cutting- portfolio companies. Today, “operations,” founded by former Blackstone Group Inc. edge innovations but by incremental stream- meaning operational improvements, has be- Partner Chinh Chu, and Motive Partners, a lining. come a ubiquitous private equity buzzword. specialist firm focused on financial technology, “It’s technology enabling businesses that Enenstein said that when he established will pay an undisclosed amount for Wilshire might not have been technology centric,” Corridor Capital in 2005, most companies Associates. Enenstein said. “The changes can seem were still focused largely on transactions. RINGO H.W. CHIU/LABJ Wilshire is the creator of the Wilshire 5000 small, but the effect is huge.” This allowed him to set Corridor apart by Corridor founder Craig Enenstein. Total Market Index, more commonly known Enenstein believes private equity will incorporating a Japanese-style focus on as the Wilshire 5000. The index is one of the have an important role to play in the macro incremental operational improvements. such as providing companies real-time views broadest measures of the U.S. stock market, shift toward a technology-enabled economy, The 2008 financial crisis made similar of their warehouse inventories, but can be tracking all stocks actively traded in the coun- providing traditional American businesses ideas appealing to other private equity firms, complex to implement. The payoff, accord- try, weighted by market capitalization. with the capital and expertise to upgrade and who were forced to take more active roles in ing to Enenstein, is worth it. It also publishes the Wilshire Trust Uni- stay competitive. their portfolio companies or risk seeing them “I think fundamentally (technology verse Comparison Service, which tracks $3.6 Corridor Capital’s founder has been collapse. improvements) are the underappreciated trillion in actively managed U.S. institutional obsessed with private equity — or some- “I would argue today that most PE firms evolving priority in private equity,” he said. assets. thing close to it — for much of his life. As a are transactional (businesses) who have “If you look out 10 years ago, you wouldn’t The 48-year-old company was founded by teenager, Enenstein said he was fascinated by dragged themselves to operations,” Enenstein have seen a lot of private equity people with Dennis Tito as an investing technology firm Japanese trading companies. said. operational backgrounds. I think in the future in the early 1970s. As the company grew, it These organizations, which include Yet, while this operational paradigm has you will see more CTOs and people with expanded into investment data, advisory and famous corporations such as Mitsubishi dominated the industry for much of the last technology experience.” management services. Corp., Mitsui & Co. and Toyota Tsusho decade, Enenstein said it is fast becoming Corridor recently raised a new private Today, Wilshire Associates manages $73 Corp., differ from western trading compa- inadequate. Today, according to the Corridor equity fund focused, in part, on these types billion in assets, advises on more than $1 nies in their scale and breadth of focus. They founder, firms are slowly being forced to of technology-driven improvements. The trillion in assets and serves more than 500 are sometimes compared to private equity add a focus on technology improvements at $118 million vehicle has already been used clients across 10 global offices, according to firms because both models feature a range of portfolio businesses to stay competitive. to purchase two portfolio companies, both of the company. businesses held by a central group focused Companies are expecting their business- which have added significant new The Santa Monica firm’s sale was primarily on opportunistic investment and growth. to-business vendors, which Corridor spe- technology-driven capabilities under Corri- initiated as part of a succession plan, accord- “I wanted to Americanize that model,” cializes in, to have similar capabilities to dor’s ownership. ing to Wilshire Chief Operating Officer Jason Enenstein said. consumer-facing tech platforms like Uber, “I think there won’t be such a thing as a Schwarz. That fascination led Enenstein to learn Enenstein said. company that doesn’t use technology in the Tito, who is now 80 years old, is planning Japanese and spend several years working The necessary changes are often small, future,” Enenstein said. to retire. Following the close of Wilshire’s sale near the end of this year, Tito will step down as chief executive and chairman. President and Vice Chairman John Hindman will also depart the company. Schwarz will take over as president and lead the firm’s investment and portfolio analyt- EP Wealth Acquires $1B Utah Firm ics teams. “In many respects, this is both a way to Deal increases Torrance manage the broader affairs of the business. pass the mantle of leadership and also an Patrick Goshtigian joined EP as its opportunity to drive investment into Wilshire’s company's assets to $9B president at that time, freeing up Parker and core capabilities and drive client-centric Holman to focus on their core wealth man- growth,” he said. By JAMES B. CUTCHIN Staff Reporter agement work. Wilshire’s newly available capital will be “I often joke that we fired ourselves,” used for a range of growth-focused initiatives, P Wealth Advisors, a Torrance-based Parker said. “What often happens as a busi- according to Schwarz. These include upgrad- registered investment adviser, or RIA, ness grows is that the entrepreneur gets taken ing tools and technology, as well as undertak- E has acquired Salt Lake City-based further and further away from the client and ing new mergers and acquisitions — possibly Insight Group Inc. and Financial Insight from their original work. … We didn’t want in overseas markets where Wilshire currently Center. The deal, which EP says will add that to happen.” has clients but no local office. more than $1 billion to assets under man- To date, EP has made 15 acquisitions “The growth over the last 48 years has all agement, is EP’s largest acquisition since its (From left) EP Wealth's Brian Parker, and grown to 15 offices across the West been organic,” Schwarz said. “We want to 1999 founding. Terms of the transaction were Patrick Goshtigian and Derek Holman. and Midwest. In addition to eight offices in preserve that culture.” not disclosed. California, the firm has locations in Arizona, Wilshire will announce further leadership EP provides what its leadership calls seminars in the library, some cold calling.” Washington, Illinois, Colorado, Texas and, changes following the deal’s close late in the “family office-like” wealth management “I wish there was some magic method,” with the Insights acquisitions, Utah. fourth quarter, according to Schwarz. services to clients with $500,000 to $100 he added, “but a lot of our successes, we just Parker said EP intends to continue grow- million in assets. outworked everyone.” ing both its range of services and geographic The firm has grown rapidly in recent By 2004, Premier Financial attracted the footprint to become a fully national business. years, according to its leadership, more than attention of another local wealth manager EP is on track to reach $10 billion in assets Wilshire Associates Inc. tripling its assets under management from who was looking for someone to take over under management by the end of this year, $2.7 billion in 2017 to approximately $9 her clients. The groups merged to form En- according to Parker, with ongoing 40% to FOUNDED: 1972 billion today. right Premier Wealth Advisors, later rebrand- 50% annual growth projected for the foresee- HEADQUARTERS: Santa Monica EP got its start as Premier Financial ed as EP. At the time, the combined business- able future. CEO: Dennis Tito Management, a two-person office in West es had less than $200 million in assets under “The goal has been to be the preeminent BUSINESS: Investing data and advisory services Los Angeles founded by childhood friends in management, according to Parker. RIA in the country,” Parker said. “When you EMPLOYEES: 261 their mid-20s. When the firm hit $1 billion in assets start to see momentum and success, that mo- ASSETS UNDER MANAGEMENT: $73 billion “We didn’t really have any clients or a under management seven years later, Parker tivates me even more.