Wilshire Associates Inc. was on the selling block in recent months, but the gap between what founder and majority owner Dennis Tito is seeking and what strategic buyers and private equity firms are offering for the Santa Monica, Calif.-based firm couldn't be closed, according to investment bankers and potential bidders who declined to be named.
Opinions of industry veterans familiar with the aborted sale are mixed on whether the 71-year-old Mr. Tito is likely to restart the process any time soon.
Mr. Tito, through a spokeswoman, declined to comment.
But Jonathan Stern, a New York-based managing director with investment bank Berkshire Capital Securities LLC, confirmed that Wilshire's management team, including Mr. Tito, hired Berkshire after “several firms” approached Wilshire about a possible sale. While declining to name names or discuss details, Mr. Stern said that after exploring the possibilities, Wilshire's managers and owners decided last month that they wanted to “remain a privately held firm,” bringing the sales talk to an end.
Industry veterans say Mr. Tito's initial hefty asking price for Wilshire — between $350 million and $400 million — quickly narrowed the list of potential strategic buyers to a handful with deep pockets: Mercer, backed by parent company Marsh & McLennan Cos.; publicly listed Towers Watson & Co.; and Hewitt EnnisKnupp, backed by parent company Aon Corp.
Bankers and private equity players who evaluated Wilshire said growth forecasts presented by Berkshire Capital were much higher than the actual growth Wilshire has been able to log in recent years for its book of businesses — composed of investment consulting, manager-of-managers fund management services, an analytic tools division and a suite of private markets/alternative investments offerings.
Also standing in the way were demands from parties interested in bidding to be indemnified from potential legal damages Wilshire could face. In June 2011, the $2.7 billion Kern County Employees' Retirement Association, Bakersfield, Calif., sued Wilshire, alleging breach of fiduciary duty with regards to the investment consultant's vetting of Westridge Capital Management, a firm whose owners were alleged to have run a Ponzi scheme.
Bankers cited Mercer as a potential strategic bidder asking Wilshire to stand ready to cover millions of dollars in potential legal damages. A number of private equity investors were likewise interested in Wilshire, but seeking guarantees.