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JULY 21, 2003
Bibliowicz's Tricky Pitch Will Sandy Weill's daughter succeed in taking her financial-planning firm public? Sanford I. Weill bought company after company and now is chairman of Citigroup (C ), the biggest financial powerhouse in the U.S. Likewise, his 43-year-old daughter, Jessica Bibliowicz, has shown she's no slouch in the acquisition game. Over the past four years, she has spent about $375 million to acquire 138 financial-planning firms on behalf of her company, National Financial Partners. Now, she faces the acid test: persuading investors that her collection of firms, which generated $361 million in revenue last year, is worth top dollar. In May, NFP made its first filing for an initial public offering, but a value for the deal and a timetable for marketing it have yet to be announced. The offering will be closely watched on Wall Street, and not just because this is perhaps Bibliowicz' best shot at establishing her own name apart from her larger-than-life father's. Her company, where she's chief executive, is backed by big-time money: $125 million from Apollo Management, the shrewd buyout shop run by '80s dealmaker Leon D. Black. More significantly, NFP is chasing the same customers as virtually every bank, brokerage firm, and insurance company in the country: high-net-worth individuals, the mother lode of fees and commissions. So Bibliowicz, who wouldn't comment ahead of the IPO, won't get a cheery reception from the rest of the industry, but that's probably the least of her worries. She must convince investors that her financial planners will work hard to deliver steadily growing earnings even after they've sold to NFP. Without planners acting as if they're still owners, NFP's stock could sour. Without a sweet stock, the planners could lose interest and bolt. More than a dozen companies have tried and failed to roll up big groups of financial advisers, says Charles "Chip" Roame, managing principal at Tiburon Strategic Advisors. None has gotten this far. The problem, says Dennis Gallant of consultants Cerulli Associates Inc., is that advisers tend to be fiercely independent entrepreneurs who like to work for themselves. "It's like herding cats," he says. Indeed, Bibliowicz, who honed her selling skills at her dad's Smith Barney mutual-fund business and at Prudential Securities (PRU ) Inc., has found that enlisting planners is harder than she expected. She told BusinessWeek in 1999 that NFP would acquire 300 firms by the time it went public in three to five years. Today, NFP has only 124 firms (it jettisoned or merged 14 of the firms it bought), and that's after wooing planners with some $40 million in bonus stock options. Bibliowicz, who runs the operation from a Manhattan office with a Central Park view and an interior designed by her architect husband, Natan Bibliowicz, deserves some slack because of the stock market's plunge since she took the job, says Roame. Some planners who want to sell are likely waiting for their business to improve so they can get a better price, he says. But even in a good market, NFP might find recruiting tough. NFP's prospectus boasts that its planners are "independent" and offer their clients "unbiased solutions." At the same time, NFP sounds far from objective in describing planners as valuable "distributors" for "financial-services product manufacturers," companies such as AIG American General, American Funds, and Travelers Life & Annuity (C ) a subsidiary of Weill's Citigroup. "When you talk about products, people like me cringe," says Kurt Brouwer, a planner in Tiburon, Calif., whose revenue comes from fees he charges for his services rather than commissions for selling products. For him, "products" connotes investments that are sold whether people need them or not, to generate commissions. Brouwer talked with Bibliowicz about NFP but says he had no desire to sell because he thought it might compromise his clients' interests. Bibliowicz and her partners at Apollo have set a lofty price for the IPO. In 15 purchases of firms in January and February, they figured NFP's stock at $19.38 a share, valuing the company at $613 million -- a sky-high 53 times 2002 net income of $11.6 million. Depending on the market's mood, Bibliowicz may be able to persuade institutional investors to ignore some noncash expenses and accept NFP's profit as $29 million. That would bring the price-earnings ratio down to 21, around the average for established brokerages and money managers. Still, that would be a stretch for an upstart, especially when investors see that revenue growth at firms NFP has owned for a year averaged only 6% in 2002 -- nothing special when the long-term revenue growth rate for financial planners is pegged at 5% to 7%. The key for Bibliowicz is to keep planners motivated. One of her tactics: Make the first 50% of any shortfall in a planner's earnings target come out of his or her own pocket. To encourage planners to exceed targets, NFP pays fat bonuses. And the planners have a huge incentive to help the shares do well because they've taken half of their sale proceeds in stock and own 49% of NFP. If the shares sink, the planners are likely to quit when their contracts expire, typically in five years. What's more, Apollo could also get restless. It owns 39% of NFP and has been a patient investor for four years. Without a successful IPO and the chance to sell some of its holdings, Apollo may look to sell to an insurance company or a bank. That could alienate planners, who fear they may be forced into selling just one company's products. For Bibliowicz, who earned $1.1 million in salary and bonus last year, her reputation is more at risk than her money. She owns only 48,600 shares outright, with options on 500,000 more at $10 a share, about half NFP's last appraisal. If she fails with the offering, well, Sandy had some setbacks, too.  By David Henry in New York Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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