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Wednesday, February 27, 2019

What Is This $445B Firm's Chief Hunting For?

Reported by Neil Anderson, Managing Editor

The asset management industry "is likely ripe for consolidation" in the eyes of Tom Faust, chairman and CEO of Eaton Vance [profile]. And he's still on the hunt.

Tom Faust
Eaton Vance
Chairman, Chief Executive Officer
When it comes to M&A targets, Faust revealed yesterday in Eaton Vance's fiscal Q1 earnings call (as transcribed by Seeking Alpha), there are a few things he's looking for. (Eaton Vance's fiscal Q1 2019 ended on January 31.)

"They would have to be a cultural complement," Faust said on the call in response to Robert Lee, managing director of equity research at KBW. "There would have to be clear potential to save costs. But probably most importantly, we would have to have a clear path to understanding that revenues were going to be sustained post transaction."

In some M&A auctions, Faust notes, Eaton Vance was "too price sensitive" to win. Put another way, they're not willing to over pay for a deal.

In terms of "strategic objectives" to address through acquisitions, Faust said, "certainly making [Eaton Vance's] business more global would be one objective." He's also particularly interested in adding fundamental emerging market equity investing capabilities, in some expansion in private markets, and in growing Eaton Vance's Parametric business line "if there are complementary businesses" that could be added on.

"We kick the tires on a fair bit of things, and so far ... haven't emerged victorious in anything since the Calvert transaction two years ago," Faust said.

Yesterday, before the earnings call, the Eaton Vance team reported fiscal Q1 2019 adjusted earnings of $0.73 per diluted share, missing expectations by $0.01, and revenue revenue of $406.4 million, missing expectations by $16.11 million. The Boston-based fund firm's AUM fell one percent year-over-year but rose one percent in the quarter to $444.7 billion on January 31, 2019. 

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