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Tuesday, July 1, 2014

Can the Old Mutual IPO Garner $100MM?

News summary by MFWire's editors

After a long and winding road, Old Mutual has finally filed with the SEC to launch an IPO.

The news caught the attention of a number of publications, and rightly so, including Investorplace, Pensions & Investments, Reuters, Bloomberg.

Renaissance Capital via Nasdaq.com also noted the deal, hinting that the IPO could garner $100 million.

So, can the IPO garner $100 million?

Consider some details of the company in question to make your own conclusion. According to OMAM's S-1 filing,

OMAM is a multi-boutique managing in total $203 billion in assets. It consists of seven shops: Acadian Asset Management LLC; Heitman LLC; Barrow, Hanley, Mewhinney & Strauss, LLC; Investment Counselors of Maryland, LLC; Campbell Global, LLC; Thompson, Siegel & Walmsley LLC and Copper Rock Capital Partners LLC.

Most of the shops do institutional, but at least three are in the '40 Act space. Acadian offers 11 funds, ICM offers one, and TS&W sub-advises six funds.

Two of these shops generate the lion's share of OMAM's revenue. As seen below from the S-1 filing:

     As of March 31, 2014, Acadian Asset Management LLC, or Acadian, and Barrow, Hanley, Mewhinney & Strauss, LLC, or Barrow Hanley, represented approximately 78% of our assets under management, from which we derive a substantial portion of our revenue. An adverse change in the operating results of either of these Affiliates, whether as a result of poor investment performance, withdrawals of assets under management or otherwise, could have a substantial impact on our results of operations.

        While our Affiliates invest in a number of asset classes, a significant portion of our assets are invested in a limited number of investment strategies. As of March 31, 2014, approximately $110 billion, or 54%, of our assets under management were concentrated across five investment strategies: Barrow Hanley's large cap value equity (approximately $54 billion, or 27%); Heitman LLC's, real estate domestic private equity (approximately $17 billion, or 8%); and Acadian's emerging markets equity (approximately $19 billion, or 9%), global equity (approximately $13 billion, or 6%) and all-country world ex-U.S. strategy (approximately $7 billon, or 3%). Consequently, our results of operations are dependent upon the abilities of our Affiliates that manage these investment strategies to minimize the risk of outflows through relatively strong performance over measured periods of time compared to relevant benchmarks and peer performance results. Also, certain investors may evaluate us on the basis of the asset-weighted performance of our assets under management. A relatively small change in the relative performance of one of our largest strategies, such as Barrow Hanley's large-cap value equity, could have a significant impact on the asset-weighted performance of our assets under management. Such volatility could adversely affect investors' perception of us.

The IPO will involve a reorganization of OMAM's parent, Old Mutual plc, that will involve, among other things: OMAM will make a dividend payment of $175.0 million to its parent, while the parent will provide $150 million in seed money for funds. 

Edited by: Tommy Fernandez

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