Private equity firms remain eager window-shoppers for asset management properties, but some industry veterans say the market's recent volatility could thin the ranks of first-time buyers.
“Private equity guys are in with a vengeance at the moment,” said one New York investment banker who requested anonymity.
Among the leading private equity shops said to be on the prowl for money management firms: Advent International Corp.; Summit Partners; Clayton Dubilier & Rice LLC; Bain Capital LLC; and CVC Capital Partners. Officials at these firms declined comment or did not return calls.
Market watchers say private equity investors will be at the table when, for example, Milan, Italy-based UniCredito's Pioneer asset management unit is put up for sale later this month. Meanwhile, they continue to eye money management units of financial conglomerates, such as Key Corp.'s Victory Asset Management division.
Whether those opportunities result in first-time private equity investments in the asset management sector is another matter.
Private equity firms might be interested, but with the market “hitting people over the head” in recent years, “it remains to be seen whether they're really going to do anything,” said one private equity veteran on the West Coast who declined to be named.
The ranks of firms making first-time investments in pure play asset management firms began expanding just as the financial crisis was coming to a head, with newcomers — including Crestview Partners, TPG Capital, Pharos Capital Group and Madison Dearborn Partners LLC — planting their flags in an industry segment long dominated by TA Associates Inc. and Hellman & Friedman LLC.
The market's plunge from late 2008 through early 2009 left many of those deals underwater.
Munder Capital Management is one example. The firm, with assets of $25.1 billion in April 2006 when Crestview, in tandem with investment bank Grail Partners, backed the firm's management team in a buyout, currently oversees $13 billion. Crestview partner Richard DeMartini didn't respond to requests for comment.
The purchase by TPG and Pharos of American Beacon Advisors Inc. from American Airlines' parent AMR Corp. is an even more dramatic example of unfortunate timing.
The Fort Worth, Texas, money manager, had $57 billion in AUM when the deal closed on Sept. 15, 2008, the day Lehman Brothers Holdings' bankruptcy sparked a global meltdown. As of June 30, the firm managed $42.7 billion in assets.