On March 11, 2025, B. Riley Financial, Inc. (NASDAQ: RILY), a prominent diversified financial services company, revealed a significant strategic move involving its investment banking subsidiary, B. Riley Securities (BRS). In a transformative carve-out transaction, BRS, which was previously a wholly-owned subsidiary, has merged with Cascadia Investments, Inc. (OTC: CDIV), a shell entity. This merger allows certain investors in Cascadia to become minority stockholders of BRS, marking a pivotal shift in the operational structure of the firm.

2. Enhanced Independence and Governance Structure

As part of this tax-free transaction, BRS is set to establish its own operational and governance framework. The common stock of BRS will now be traded on the OTC Pink market under the ticker symbol "BRLY." This new independent reporting structure aims to deliver enhanced transparency to stakeholders, enabling a clearer valuation of BRS as a pure-play investment bank that primarily focuses on small-cap and middle-market clients.

BRS has a rich history since its acquisition of FBR in 2017, having successfully led over 250 capital markets transactions and raised more than $115 billion in debt and equity for its clients. Furthermore, the firm has advised on mergers and acquisitions (M&A) and restructuring transactions totaling over $33 billion.

3. Leadership Statements

Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, expressed enthusiasm about the transaction, stating, "BRS has been the foundation of our firm's success ever since we started a smaller broker dealer focused on small cap companies in 1997." He emphasized that the carve-out allows BRS to return to its roots, operate independently, and pursue a distinct growth strategy. Riley also highlighted the firm's historical performance, noting its steady EBITDA and strong cash flow, and he anticipates that BRS will exceed previous levels of growth and profitability as a separate entity.

Co-Chief Executive Officers Andy Moore and Jimmy Baker echoed this sentiment, stating, "We are extremely enthusiastic about how this transaction repositions our firm and what it means for our ability to serve our clients." They underscored the firm's debt-free status and strong capitalized balance sheet, positioning BRS as a formidable player in the middle market for capital markets, research, and M&A advisory services.

4. Transaction Structure and Ownership

The transaction has been structured to ensure minimal costs while facilitating a smooth operational transition. Following the merger, B. Riley Financial will retain approximately 89% ownership of BRS shares, with the remaining shares held by BRS employees in the form of restricted stock awards and certain existing shareholders of Cascadia. The BRS Board of Directors will comprise five members, four of whom will be appointed by B. Riley Financial. Furthermore, the board will include two independent directors within 30 days following the transaction.

B. Riley Financial will continue to consolidate the financial results of BRS in its own financial reports, ensuring that stakeholders remain informed about the subsidiary's performance.

5. Legal Counsel and Advisors

In conjunction with this announcement, B. Riley Financial has engaged Sullivan & Cromwell as legal counsel, while O'Melveny & Meyers has been appointed as legal counsel for BRS, highlighting the thorough preparation undertaken for this strategic move.

6. About B. Riley Financial and BRS

B. Riley Financial is a multifaceted financial services firm dedicated to providing tailored solutions that address the strategic, operational, and capital requirements of its clients. The company offers a comprehensive range of services, including investment banking, institutional brokerage, private wealth and investment management, and financial consulting.

BRS, on the other hand, specializes in delivering a full suite of investment banking and capital markets services to corporations, financial sponsors, and institutional investors across various industries. Its offerings include M&A advisory, corporate restructuring, and proprietary equity research, underscoring its commitment to serving the evolving needs of its clientele.

7. Conclusion

The carve-out transaction between B. Riley Financial and B. Riley Securities signifies a strategic realignment aimed at bolstering BRS's operational independence and growth prospects. With a seasoned leadership team and a clear focus on the middle market, BRS is poised to leverage this new chapter to enhance service delivery and drive value for its stakeholders. As the firm embarks on this exciting journey, market observers will be keenly interested in how it capitalizes on the anticipated recovery in M&A and capital markets activity.

Original press release