The French and Germans are coming. But the South Africans too?
In an eight-day period, five firms with a total of more than $418 billion in assets under management have changed hands. Most of the new owners are non-U.S. companies.
The total tab for the transactions, based on enterprise value, comes to more than $8.5 billion.
The remarkable pace of cross-border merger-and-acquisition activity among money managers -- and its timing -- surprised industry observers.
The timing by foreign buyers is "odd enough with the strength of the U.S. dollar," said Bruce McEver, president of Berkshire Capital Corp., New York. "But basically it's a global business and they need the U.S. capability."
And there may have been an element of panic buying as the number of eligible independent firms is rapidly declining. (A story in the May 1 issue of Pensions & Investments listed only 21 independent, privately held money managers among the nation's 100 largest. Among the survivors: Capital Guardian Trust Co.; TCW Group; Wellington Management Co. LLP; and Fayez Sarofim & Co., now reported to be up for sale.)
Of course, all deals are not equal. Alliance Capital Management LP's $3.5 billion purchase of Sanford C. Bernstein Inc. represents a marriage between two strong institutional houses that complement each other neatly: Alliance, led by Bruce W. Calvert, chief executive officer, is a growth stock manager with strong retail distribution while Bernstein is a traditional value manager with a strong private-client network.
The deal was priced on the high side, at a bit more than 4% of assets under management, according to Brad Hearsh, managing director in PaineWebber Inc.'s investment banking division, New York.
Others, such as Old Mutual PLC's bargain-basement purchase of United Asset Management Corp. -- valued at 1.2% of assets under management -- and Investment Advisers Inc.'s management buyout from Lloyds TSB Group PLC, represent efforts to revive struggling franchises.
The surge of activity is partly coincidence, Mr. McEver noted, because these deals have lead times of three to nine months. He expects there are more to come.
Here's a rundown of the latest deals, all of which reflect the growing international diversification of the money management industry:
* Alliance Capital's $3.5 billion purchase of Sanford C. Bernstein has won praise from analysts as a plus for both parties. While a combination of two New York-based firms, Alliance is 57% owned by AXA Financial Inc., a subsidiary of Paris-based AXA SA.
* Old Mutual's acquisition of Boston-based UAM represents both an effort by the London-domiciled (although South African-bred) company to build a global money management business, and a final concession by UAM officials that their groundbreaking money management holding company just hasn't panned out. UAM's enterprise value was estimated at $2.4 billion by Cambridge International Partners Inc., New York; UAM's equity alone was valued at $1.46 billion.
* IAI's buyout from London-based Lloyds TSB runs contrary to the trend of foreign buyers picking up U.S. firms and represents the end of a long saga that nearly crippled the Minneapolis-based company's business. Assets under management have plunged 84% to $1.8 billion since year-end 1996.
Now, Keith Wirtz, president and chief investment officer, has the chance to rebuild the firm as an institutional equity boutique; the firm surrendered $1 billion in fixed-income business last year, and is selling its $400 million in retail mutual funds to Federated Investors Inc., Pittsburgh.
Dean Eberling, vice president at Keefe Bruyette & Woods Inc., New York, estimates the slimmed-down firm was worth $35 million to $40 million.
* CDC Asset Management's $2.2 billion purchase of Boston-based Nvest LP, including $311 million in funded debt and its 48% stake in MetLife, turns the Paris-based giant into an international player. Originally created in 1816 by Louis XVIII to protect private deposits, Caisse de depots Group's money management arm has been seeking to become a player on the global scale.
Nvest's $134 billion in assets -- spread among such firms as AEW Capital Management; Loomis, Sayles & Co.; and Reich & Tang Capital Management -- boosts CDC to $304 billion, making it a top 20 player in the global arena and a top 10 player in Europe.
* Liberty Financial Cos. Inc., Boston, in a purely domestic deal, announced June 12 that it planned to acquire Wanger Asset Management LP, Chicago, for $280 million in cash, plus contingent payments of $170 million over the next five years. Wanger manages $8.8 billion in assets.
* Commerzbank AG, Frankfurt, also has its eye on the U.S. market, hoping to purchase a bigger player than its current American subsidiaries, Montgomery Asset Management LLC, San Francisco, and Martingale Asset Management LP, Boston.
However, Commerzbank may merge with crosstown rival Dresdnerbank AG, which already owns Dresdner RCM Global Investors, also of San Francisco.