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Thursday, July 3, 2014

Why Will Henderson Pay $200MM for Geneva?

News summary by MFWire's editors

Monday's acquisition of the Milwaukee-based institutional asset manager Geneva Capital Management by Henderson Global Investors gives one food for thought about the importance of the institutional channel for fundsters.

Henderson is paying a pretty penny for the firm. Reuters reports that Henderson will pay $130 million up front, but that price could go up as high as $200 million if certain targets are met.

According to the ancient asset management M&A style of gauging acquisitions, a $200 million purchase price translates into more than 3 percent of the purchased assets. That's pretty sweet compared to industry deals that have taken place in the past few years, most of which were below 2 percent. The purchase price in the Nuveen deal possibly represents the biggest ratio of 2.8 percent, and that's still below this Geneva.

Moreover, Reuters notes that before the deal, Henderson's asset mix was 83 percent retail and 17 percent institutional. The deal will change that ratio to 50 percent retail and 42 percent institutional. Also, the newswire notes that the Austalian-British firm aims to double its global assets by 2018 to over $220 billion, and that it was looking for a big deal to break into the U.S.

Other newspapers that take a crack at analyzing deal include the Financial Times, Pensions & Investments, InvestmentWeek, and Milwaukee-Wisconsin Journal Sentinel.

The Journal Sentinel notes that the five members of the management team at the 25-person Geneva, have signed five-contracts with Henderson. The paper reports that the team will be given autonomy over its investment process.

So, why does a firm with big asset gathering aspirations, and a heavy retail presence, pay so much for an institutional manager?

Does Henderson see the institutional channel as one that can provide a quick assets boost?

Or will Henderson ultimately translate Geneva strategies into the '40 Act space? If that were to be the case, what kind of distribution muscle can Henderson bring to bear?

Does Henderson believe that quick growth in the U.S. is worth a premium.

What are the folks at Henderson thinking? 

Edited by: Tommy Fernandez


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