Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Delaware's Pricing May Reflect a Email Routing List Email & Route  Print Print
Wednesday, August 19, 2009

Delaware's Pricing May Reflect a "Crunch" Discount

Reported by Sean Hanna, Editor in Chief

Did Macquarie get a bargain Wednesday morning when it purchased Delaware Investments from Lincoln Financial Group? Certainly the $428 million price tag on $126.7 billion of AUM makes the deal appear to be a bargain at first blush.

However, deal consultants point to issues with Delaware's business that make it less valuable to an acquirer. They also point to the the current market environment as a challenging one in which to obtain strong pricing. Indeed, one consultant praised Goldman Sachs -- Lincoln's advisor on the deal -- as doing a good job in getting a deal done at all.
Delaware's AUM Breakdown
Equities ($28.8 billion)
  • Growth: $10.6 billion
  • Core: $2.5 billion
  • Global: $8.9 billion
  • Value: $6.8 billion

    Fixed Income ($97.9 billion)

    Total AUM $126.7 billion
    Mutual Fund AUM $19.2 billion
  • Source: Delaware Fact Sheet, Lipper
    Using the traditional rough measure of the sales price as the percent of assets under management, the pricing works out to just 0.33 percent of AUM. That is barely 10 percent of the pricing that asset managers got when non-U.S. firms were hot and heavy to buy American asset managers at the start of the decade.

    One issue warping the numbers, however, is the large proportion of Delaware's assets derived from the insurance business. Typically, general account assets are little valued by acquirers, say dealmakers. At Delaware, $97.9 billion of its AUM come from fixed income investments. Much of that falls to the insurance business.

    Cutting out those fixed income assets leaves some $28.8 billion of equity assets. That means that Macquarie paid 1.48 percent of equity AUM for Delaware. Still a relatively low price, but not the bargain the deal first appears.

    Assuming that one of Macquarie's motivations for doing the deal is to gain a foothold in the U.S. mutual fund business provides another way to view the pricing on the deal. According to data gathered by Lipper, Delaware had $19.18 billion in mutual fund AUM at the end of June. From the fund perspective, Macquarie paid 2.23 percent of mutual fund AUM for Lincoln.

    Of course, Macquarie is going to have to restart the investment in the Delaware Funds brand if it is to realize the full value of its new American asset. Lincoln has spent much of the past decade dismantling the Delaware's distribution, marketing and branding as it focused on building distribution through Lincoln's sales force. Rebuilding those assets will not come cheap.

    The purchase price is 9.5 times Delaware's 2008 EBITDA of $45 million. Delaware's pre-tax operating margin fell by half to 10 percent last year, below the industry's typical margins of 20 -40 percent.

    "It appears from the historical reported financials, the large amount of lower fee general account assets and overall fixed income focus that the Parent received a market price for Delaware," said Jon Stern, managing director at New York City-based investment bank Berkshire Capital.

    The price, said Jeff Lovell of private equity firm Lovell Minnick, was "reasonable given market uneasiness over the past year."  

    Stay ahead of the news ... Sign up for our email alerts now
    CLICK HERE

    5.0
     Do You Recommend This Story?



    GO TO: MFWire
    Return to Top
     News Archives
    2021: Q4Q3Q2Q1
    2020: Q4Q3Q2Q1
    2019: Q4Q3Q2Q1
    2018: Q4Q3Q2Q1
    2017: Q4Q3Q2Q1
    2016: Q4Q3Q2Q1
    2015: Q4Q3Q2Q1
    2014: Q4Q3Q2Q1
    2013: Q4Q3Q2Q1
    2012: Q4Q3Q2Q1
    2011: Q4Q3Q2Q1
    2010: Q4Q3Q2Q1
    2009: Q4Q3Q2Q1
    2008: Q4Q3Q2Q1
    2007: Q4Q3Q2Q1
    2006: Q4Q3Q2Q1
    2005: Q4Q3Q2Q1
    2004: Q4Q3Q2Q1
    2003: Q4Q3Q2Q1
    2002: Q4Q3Q2Q1
     Subscribe via RSS:
    Raw XML
    Add to My Yahoo!
    follow us in feedly




    ©All rights reserved to InvestmentWires, Inc. 1997-2021
    14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
    Privacy Policy :: Terms of Use