Sometimes your business can be just like a Beatles song.
Just three months after Hennessy Advisors
got onto Nasdaq
, Neil Hennessy's
firm has garnering praise from SeekingAlpha
In his article
, analyst John Leonard declares respect for such things as Hennessy's acquisitive strategies
, like the FBR deal.
He writes this on the subject:
Highly-accretive M&A strategy provides institutional-class infrastructure and significant earnings power.
Although the M&A cadence has remained fairly steady since 2000 with the acquisition of 13 mutual funds (prior to 2012), the most recent acquisition was the largest ever. In June 2012, HNNA acquired a family of 10 FBR funds with $2.2 billion in AUM (at closing) for $38.9 million. Three of the funds were merged into existing Hennessy funds and the remainder were rebranded with the Hennessy name with no changes in the portfolio managers.
As the debt from the FBR acquisition is gradually paid down, HNNA can continue to strategically acquire funds with its new status as the hunter rather than the hunted and greater borrowing capacity (its lender allowed the loan balance to increase from $1.9 million to $30 million). This should enable continued AUM growth regardless of market conditions. HNNA can be opportunistic in acquiring funds at attractive multiples (as a % of AUM) as many of its targets are highly incentivized to sell. For example, a smaller manager facing increasing compliance costs and wanting to retire has to sell in order to monetize his or her multi-decade track record.
Leonard also writes this on the subject of Hennessy's lean business model:
Specifically, HNNA only has 18 employees despite $5.4 billion in AUM. In the asset management industry, this extremely high profit per employee ratio is typically only seen at hedge funds or private equity firms (to which so many mutual funds are compared).
Moreover, by lowering the expense ratios of the acquired funds and improving performance (in some instances), HNNA is less vulnerable to the increasing competition from lower cost products.
Hennessy also been kicking tail in terms of performance, thanks to equity market tail-winds.
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