RCS Capital to Acquire Strategic Capital Cos.

RCAP has entered into a purchase agreement with Validus Strategic Capital Partners, which owns SC Distributors, a wholesale broker-dealer of alternative investments, and Strategic Capital Advisory Services.
Mario Garcia

Mario Garcia, Validus Group

Nearly one year after entering the independent broker-dealer financial services arena, RCS Capital Corp. continues its shopping spree adding an $80 million acquisition to accelerate its distribution platform growth and offer more alternative investment products.

RCAP said it has entered into a purchase agreement with Validus Strategic Capital Partners, which owns SC Distributors L.L.C., a wholesale broker-dealer of alternative investments, and Strategic Capital Advisory Services. The deal is expected to close in the third quarter.

SCD and SCAS, which provides advisory and operational services to non-exchange traded alternative investment vehicles, will operate as a stand-alone business alongside RCAP’s existing wholesale distribution brokerage and other financial services companies. They will continue to be operated by the existing management under the Strategic Capital brand, including Patrick Miller, president and co-founder of SCD, and Kenneth Jaffe, president and co-founder of SCAS. Other SC executives expected to remain on board are Mike McDaniel, national sales manager and co-founder of SCD and Mark Brandenberger, CFO and co-founder of SCD.

“The acquisition of Validus Strategic Capital Partners allows us to further diversify RCAP’s wholesale distribution platform with more institutional quality investment products, which are not sponsored by AR Capital,” Nicholas Schorsch, RCAP Executive Chairman, said in a news release. “This acquisition is part of our overall vision to provide our growing retail investor base with multiple investment solutions through our family of leading investment vehicles.”

SC distributes Carter Validus Mission Critical REIT, RREEF Property Trust, Sierra Income Corp., TriLinc Global Impact Fund and Greenbacker Renewable Energy Co. with year-to-date sales of $775 million.

“We believe this is an excellent fit for both RCAP and SC,” said Mario Garcia, CEO and managing partner of Validus Group, a Tampa, Fla.-based boutique investment firm that is one of the principal investors in SC.

Garcia made his comments in releases from both RCAP and Validus, which released the purchase price. The final amount could be more “pursuant to an earn-out mechanism,” according to Validus.

Miller noted in the RCAP release that both teams were looking forward to creating “one of the most dynamic wholesale distribution platforms in the industry.”

Michael Weil, RCAP president, said in his firm’s release that the acquisition, “adds full-service securities firms to the independent broker-dealers, financial institutions and registered investment advisors that comprise our current selling groups.”

RCS Capital, the investment banking arm of RCAP, served as financial advisor and Proskauer Rose L.L.P. served as legal advisor to RCAP. Moelis & Co. was the financial advisor and Morris, Manning & Martin, L.L.P. served as legal advisor to VSCP.

The SC announcement comes nearly a month after RCAP completed the acquisition of the Cetera Financial Group, a leading independent broker-dealer, from affiliates of Lightyear Capital for $1.15 billion in cash. RCAP said the acquisition created the second largest independent financial advisor network in the United States, adding more than 6,600 financial advisors to the firm’s growing retail financial advisory platform. Once all its announced broker-dealer acquisitions close, RCAP will have about 9,000 retail advisors in its new retail advice channel, Weil said in a release announcing the Cetera deal.

While Cetera closed five months ahead of schedule, RCAP has not yet closed on other acquisitions, including Investors Capital Holdings, Summit Brokerage Services, Inc., J.P. Turner & Co. and The Hatteras Funds Group. It is also working on the consolidation of First Allied Holdings, the first independent broker-dealer financial services business it agreed to acquire last June for at least $200 million.

Last week, Schorsch announced the executive leadership of the RCAP management team for the retail advice platform, naming Larry Roth, former CEO of Advisor Group, as CEO of the new Cetera Financial Group.