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Monday, May 10, 2010

Legg Mason 'Streamlines' its Business Model

Reported by Daniel Tovrov

Legg Mason is "streamlining" its business model to increase profitability and growth, according to the Q1 2010 earnings report, released today.

In the effort, Legg Mason executives said they will:

  • Transition certain shared services to investment affiliates where they will be closer to the actual client relationships and can be delivered with greater effectiveness.

  • Focus the resources that remain at corporate on strategic services such as retail distribution, capital allocation, and investing in and with investment affiliates.

  • Create growth initiatives for fiscal year 2011 will include further investments in distribution and international growth, the expansion of capital available to seed products and the pursuit of additional lift-out and bolt-on transactions.

  • Share revenue with the Americas Distribution group from retail-based AUM growth.

  • Create estimate cost savings of approximately $130 to $150 million on a run rate basis by the fourth quarter of fiscal year 2012.

  • Iincur restructuring and transition related costs in the range of $190 to $210 million over the next 18 months.

  • Legg Mason executives expect that the net result of these actions should be an improvement in adjusted operating margins of 6 to 8 percent by the end of fiscal year 2012
    Company chairman and CEO Mark Fetting said he wants to build on the foundation set in the last four profitable quarters and stay focused on a multi-manager structure.

    It's not immediately clear what the changes mean for Kimberly Mustin, Legg Mason's head of institutional business for the Americas. Legg Mason affiliates involved in the changes include BrandyWine Global, Royce & Associates, Western Asset, Legg Mason Capital Management, and Legg Mason Global Equities Group. 

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