The family fortune of Richard M. DeVos, co-founder of Amway Corp., now is more than a pool of assets to be tapped by money managers; it's a competitor.
RDV Corp., Grand Rapids, Mich., the company that manages the DeVos family assets, is a partner with Allstate Insurance Co. Northbrook, Ill. in financing Convergent Capital Management Inc., a money management umbrella firm based in Chicago that recently made its first purchase.
Convergent bought Ambs Investment Counsel, a manager of about $365 million - including $169 million for pension funds and $51 million for endowments and foundations - located in Grand Rapids, the heart of Amway country.
Terms were not disclosed.
Convergent is similar to other money management acquisition firms, but may be able to use its relatively strong financial backers as a way to get an edge over its competitors.
Keith Ambs, president of Ambs, said the financial strength of RDV and Allstate, as well as the DeVos family's local presence, made it tough for him to pass on the deal.
Mr. Ambs said that while he had been interested in creating a succession plan for the firm, until he was contacted by Convergent in January he did not have a serious interest in selling out.
Jack Franz represented Mr. Ambs in the deal, and said the combination of Convergent and Ambs is a good one. Mr. Franz is head of J. Franz & Associates, Morton Grove, Ill. Mr. Franz is a former Merrill Lynch investment banker specializing in investment banking who now does M&A on his own. Mr. Ambs benefits from the financial strength of RDV and Allstate, and gains some possible marketing strength locally from the indirect connection to Amway. The DeVos family is highly regarded in the Grand Rapids area, near where Amway is based, which could benefit Ambs, he said.
RDV's executives see Convergent as an opportunity to add value in a good industry. "We like the money management business," said Jerry Tubergen, president of RDV. RDV's executives feel they have a strong concept of how the industry works, he said. He said Convergent executives came to them, and "we thought the concept made sense."
RDV's involvement with the firm is limited to board representation, and its executives will not be involved in day-to-day operations, he said.
Mr. Tubergen declined to discuss how much RDV invested in Convergent.
Convergent's other backer, Allstate, has invested $2 million so far out of a total commitment of $5 million. The balance will be invested as additional deals are added, said T. Cole Telling, venture group manager for Allstate.
Mr. Telling said Allstate likes to be in businesses where there's a logical progression to consolidation, like money management.
Mr. Telling said Convergent could fill a niche that United Asset Management may be too large to cover effectively, buying money managers of $1 billion or less. UAM's large size really makes it less cost effective to go after firms in that range, he said.
The involvement by both appears to be as passive venture capital investors. RDV operates a series of affiliated companies, and has many other investments. (Mr. Tubergen declined to discuss them, but according to press reports, investments by RDV or DeVos family members include: Heritage Fund I, a fund focusing on middle-market manufacturing and distribution businesses; Genmar Holdings Inc., a company run by buy-out specialist Irwin Jacobs; the Orlando Magic professional basketball team; and Southside Bank, a Grand Rapids, Mich., banking startup that eventually was aborted.)
Mr. Tubergen also said there is no connection between RDV and Amway beyond Mr. DeVos. Amway already sponsors its own equity mutual fund, Amway Mutual Fund Inc., with about $73 million under management. The fund is subadvised by Ark Asset Management, New York.
Executives at Convergent say the Ambs purchase is the first step in their plan to reach about $15 billion in assets and go public.
H. Tom Griffith, principal, says Convergent plans on buying at least one more firm this year.
It will use a hands-off management style, like UAM, but will take stakes of less than 100%, which UAM generally doesn't do.