Deal-hungry buyout groups are hunting for targets across the investment industry with Blackstone, KKR, General Atlantic, Stone Point and Thomas H Lee all acquiring asset management or wealth businesses in the past 12 months.
The value of deals involving asset and wealth managers jumped to $38.9bn last year, almost triple the previous year, according to Piper Sandler, the Minneapolis-based investment bank.
Reverence Capital Partners, a little known player, this year emerged as a forceful new competitor after it clinched the biggest deal so far involving an asset management and private equity. Reverence and GTCR, a Chicago-based private equity manager, in February agreed to buy the $603bn asset management arm of Wells Fargo for $2.1bn.
“The Wells Fargo acquisition brings private equity into new territory in terms of the scale of their ambitions in asset management,” says Aaron Dorr, a principal at Piper Sandler.
New York-based Reverence, which was founded in 2013 by Goldman Sachs alumni Milton Berlinski, Peter Aberg and Alex Chulack is keen to win more deals.
“In spite of the headwinds from fee pressure and the shift from active to passive, asset management is a sector with attractive long-term prospects, particularly if you are a scale player,” says Berlinski.
But the modest $2.1bn sale price, a valuation that represented just 0.3 per cent of WFAM’s assets, has prompted talk among industry observers that Reverence and GTCR bought a lemon unwanted by other suitors.
Berlinski rejects this description. “There are very few moments when a business of this size become available. We think we paid a fair price.
He asserts that WFAM has a “quality management team, a strong culture and very good investment performance”.
Below the radar, Reverence has participated in a range of deals involving Russell Investments, Victory Capital, Vida Capital, Oak Hill Advisors as well as the acquisitions of Advisor Group and Ladenburg Thalmann, two wealth management platforms.
Including WFAM, the stable of managers owned outright or partly controlled by Reverence now oversee close to $2tn of assets.
Private equity managers are also encouraging investment firms which they have acquired to pursue bolt on deals, creating a second layer of M&A activity.
Texas-based Victory Capital has developed into a $147bn multi-boutique with 10 franchises after completing multiple acquisitions with the backing of Reverence, including deals with Munder Capital Management, RS Investments, USAA and THB Asset Management.
Reverence retained a 14.4 per cent stake after Victory floated on the Nasdaq exchange in 2018. Its share price has since more than doubled.
“We encourage portfolio companies to pursue M&A when it is appropriate. Smaller managers find it difficult and costly to access distribution. Bringing the franchises together on a shared platform means that Victory now delivers one of the best profit margins in the asset management industry,” says Berlinski. Victory’s net income more than doubled to $213m last year even though it registered net outflows of $19.4bn in 2020.
M&A activity across the highly fragmented US wealth management has been running at a frenetic pace for the last three years, driven by private equity groups.
“Wealth management has very attractive characteristics for private equity buyers. Client numbers are increasing for wealth managers and client loyalty tends to be very strong with a 90 per cent annual retention rate,” says Dorr.
Reverence bought Advisor Group in 2019, then a platform of four wealth management businesses with combined assets of $272bn. Three months later, Advisor bought Ladenburg Thalmann in a deal worth $1.3bn, including debt.
Founded in 1876 as an investment bank, Ladenburg Thalmann’s activities have expanded to include wealth management, insurance and brokerage services.
Together Advisor and Ladenburg Thalmann employ 11,500 financial advisers and oversee more than $450bn in client assets.
“We have created one of the most robust wealth management platforms in the country to support advisers growth by combining these two firms,” says Berlinski, a veteran of more than 250 deals over a 26-year career at Goldman.
The deal has also created a new competitor to Wall Street’s so-called wirehouses, the brokerage and wealth management platforms run by Morgan Stanley, Bank of America, UBS and Wells Fargo.
Dorr adds that “wealth managers can be combined without interruptions to the core business of serving clients. That is more difficult in asset management deals”.
Since it was launched, Reverence and its co-investors have committed a total of $5.4bn, raising two private equity funds and a structured credit fund. It plans to launch a third private equity fund this year which will again target financial services companies.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
