The mutual fund deal scene now is a lot like Tuesday or Wednesday evening for Manhattan restaurants: there is a small stream of really-hungry dinners which everyone has to compete for.
To be sure, these dinners are worth luring into your restaurant. The straight-shooting RidgeWorth
chairman and chief executive Ashi Parikh
wants to buy a few boutiques
. The affable Neil Hennessy
as well is more than a little peckish
. Meanwhile, the understated Hancock's Andrew Arnott
is open to some adoptions
And they're all good tippers.
But how do you attract the attention of this smallish population of firm acquirers?
spoke earlier in the week with attorney Jim Abbott
, head of the M&A practice at the law firm Seward & Kissel
. The firm is big player in the fund firm deal space, even operating a website
providing resources for fundsters who are in a deal-making mood.
Good performance matters, of course, but you need more, he says.
For example, according to Abbott, if you want to get the attention of buyers this year start investing now in your PMs and your compliance and other back-office teams.
"There are a lot of firms out there that are still not as transparent as the market would like them to be. There are also a lot of firms that are not deep in terms of their people talent," he said. "Buyers want to see something that they can plug into their organization without worrying whether or not it will continue to do well."
The idea of an institutionalized asset management team is a big deal for many buyers, Abbott said. Firms are nervous with buying shops that revolve around the talents of a single portfolio manager, for all the obvious reasons.
"A place that is pretty much one investment picker isn't so much a firm as it is a person. And buying a person is risky," he said. "If that's the case for a boutique, then maybe they should wait a little bit and do what they can to make themselves look more like a full blown business."
Shops that invest in their infrastructure are also prized, he said.
"One can never do enough to make one's organization robust in terms of compliance, technology and transparency," he said.
Now, dinner's palates for fund firm acquisitions have gotten somewhat particular as of late, according to Abbott. Specialists in alternatives and ETFs have been fancied lately by large fund families interested in entering the space. There is also a steady supply of hedger funds, PE and other non-'40 Act firms looking to buy a space in mutual fund country.
Also, if you are smallish shop new to the M&A game, you might want to focus on investment banks that specialize heavily in mutual funds, Abbott said. His firm provides a list of such banks here
One final bit of advice from Abbott, take advantage of the lull in deals now to make yourself presentable.
While M&A activity now is like Tuesday night dining, he says that there is a lot of pent up demand, lots of money sitting on the sidelines and lots of players eager to position themselves to grow. It would take too much to flare up things up to the level of Friday date night hustle and bustle.
"There is all kinds of money coming off the sidelines. Private equity has plenty of dry powder," he said.
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