In the simplest terms, B. Riley Financial is a financial services firm, but such a succinct definition really misses the mark with all the company does, especially when you consider just how active it has been in the last 12 months. Since November 2020, the firm acquired investment banking and asset management firm National Holdings; launched a compliance, risk and resilience consulting practice and a financial sponsors group; and, more recently, expanded its corporate advisory and valuation services practice — and that’s only scratching the surface of the company’s notable accomplishments in 2021.
Acquiring companies and launching new verticals isn’t entirely new territory for B. Riley. The firm, which brought in GlassRatner in 2018, also features capabilities in wholesale and industrial solutions, asset-based lending appraisal, investment banking and capital markets, principal investments, real estate solutions, retail solutions, wealth management and venture capital. However, behind the company’s recently aggressive growth strategy is a simple explanation.
“We’ve gotten to the size and critical mass to where the phone just rings — sometimes it’s a deal, sometimes it’s a group that wants to join us or some other opportunity. It’s an interesting time for the firm,” Tom Kelleher, co-founder and co-CEO of B. Riley Financial, says.
Kelleher’s fellow co-founder and co-CEO, Bryant Riley, is at the forefront of much of B. Riley’s M&A activity. As the shepherd of the larger opportunities on the company’s balance sheet, Riley has an extensive list of industry contacts and frequently comes across opportunities to add a service or a subject matter expert, with many of those opportunities coming because someone sought Riley out in the first place. Kelleher then manages more of the day-to-day operations of the business, including helping to fold in teams and acquisitions. The level of trust Riley and Kelleher share as college friends and longtime business partners helps make this arrangement work and it’s something they try to instill in the entire company, especially when adding in a new division and its associated team.
Each division at B. Riley has a group head called an “ambassador” who is responsible for ensuring team members from their group are communicating across the company and getting up to speed on the capabilities and activities of other groups. Such a system for bringing on new teams has made smaller acquisitions “pretty easy,” according to Kelleher, while providing a solid blueprint for larger transactions, such as B. Riley’s integration of National Holdings, which has doubled the headcount of the firm with the addition of hundreds of financial advisors.
Financial Sponsors Coverage and Cybersecurity
Growth alone isn’t enough of a reason for B. Riley to launch a new division or make an acquisition. Take, for example, the firm’s financial sponsors coverage group, which launched in November 2020.
“If you look back 25 years, we had established relationships with sponsors through our research and through our banking and then through appraisal and all the different offerings that we had,” Riley says. “There are so many different touch points on the sponsor side. Now, we’re just really focused on making sure that we’re taking advantage of that with all the services we can offer.”
To head up this new group, B. Riley hired Dan Kraft and Tim Bottrell as co-directors of financial sponsors coverage. The division has been up and running for a year, focusing on developing and maintaining relationships with alternative capital managers, including private equity firms, family offices, sovereign wealth, credit funds and hedge funds. In many ways, this division is the result of B. Riley’s desire to be “more institutional” about its approach to the financial sponsor community.
“We purposely brought them in to help cross-connect our various divisions — to make sure the left hand of the firm knows what the right hand is capable of doing and to help foster and coordinate some of that activity,” Kelleher says. “We kept adding companies and every company had more and more relationships with private equity funds. It reached a point to where it was a lot more efficient to have some folks on board full time that could help manage traffic.”
“When we have a company we’re selling to, we’re not just relying on a banker independently working by themselves,” Riley says. “It’s put into the system so that we not only can provide the most value for the client, but we can also show product to financial sponsors and private equity.”
A few months after the launch of the financial sponsors group, B. Riley added its compliance, risk and resilience consulting practice, hiring Scott Corzine and Duane Lohn to lead the new group. One of the primary drivers of B. Riley’s decision to add the practice was not only an increasing need from its clients to address compliance issues, but a drastic increase in the need for enhanced cybersecurity measures.
“Compliance and risk management are important for any company in any stage of its life cycle. When I think of that group, I think more of the cyber side of things, only because cyber is such a prevalent issue,” Kelleher says. “The sophistication of hackers and the velocity with which the landscape changes has risen to a level where it’s imperative that you have an arsenal of tools at your disposal to combat the threats. This group is here to help clients build their arsenal to navigate those threats. And, frankly, they not only assist clients, they have been instrumental in enhancing our internal cyber posture as well, which is the beauty of all these groups that we have.”
Value of the Whole
Launching new groups is just one of the ways B. Riley is adding to its “tool chest,” allowing it to be a one-stop shop for its clients. But just having a lot of instruments at your disposal isn’t useful if they aren’t working in harmony. That is Riley and Kelleher’s biggest challenge as leaders of the company but one they have successfully navigated by emphasizing the need for trust between all of B. Riley’s varied departments.
“Bryant and I are really good as co-CEOs because we trust each other implicitly. We’re trying to build an organization where people can trust each other because at the end of the day, you’re entrusting your client and your relationship with somebody else in the firm, and that’s a big deal,” Kelleher says. “We spent a lot of time on that, and I think we’ve made a lot of headway. I think that’s a big reason why we’ve been successful.”
The trust Riley and Kelleher build within their teams is meant to complement the customer-centric approach each and every professional at B. Riley is expected to bring to client relationships. This approach is further enhanced by an interdepartmental referral system.
“We’re not trying to have everyone in the firm sell every product that we offer,” Kelleher says. “Rather, we’re simply trying to make sure that everyone in the firm understands the extent of our capabilities such that when they are listening to their client and that client expresses a need, our co-workers know enough to say: ‘We have someone that might be able to help you with that.’”
Riley attributes at least some of B. Riley’s symbiotic culture to its standing as a public company.
“One of the nice things about being public is that there’s stock that a lot of our employees own and that all works together,” Riley says. “You don’t have one group that’s focused so much on only its own business. They recognize the value of the whole.”
Riley and Kelleher have both been pleased with the value brought to the table by B. Riley’s newer divisions and offerings as well as its more long-standing capabilities. Such success is further fueling the firm’s expansion strategy. According to Riley, the company is currently looking to grow its M&A practice while adding strength in credit and fixed income. Kelleher adds that enhancing the company’s venture capital offering will be important while noting the firm may look into angel investing at some point. At the rate its currently going, any new initiative may be just around the corner.
Phil Neuffer is managing editor of ABF Journal.