Healey's Successor Keeps His Eye on the M&A Ball
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Tuesday, October 30, 2018

Healey's Successor Keeps His Eye on the M&A Ball

Despite some concerns about deal pricing, Affiliated Managers Group's (AMG's) new chief continues to be on the hunt, especially given the current market environment.

Nathaniel Dalton
Affiliated Managers Group
President, CEO
"There continues to be an outstanding secular opportunity to partner with the best boutique firms," Nate Dalton, president and CEO of the publicly traded multi-boutique, said yesterday on the firm's Q3 2018 earnings call, as transcribed by Seeking Alpha. Dalton was responding to questions from analyst Bill Katz of Citigroup.

Yet Dalton agreed with Katz that some asset manager deal pricing seems a bit high at the moment.

"As we always say, the timing of investments is driven by the dynamics, and as I just said, most of these firms don't have to do anything at any sort of point of time but also, neither do we," Dalton said. "Fundamentally, I agree with the part of your question, which is looking at some of the prices, I think there are definitely questions there."

On the flip side, Dalton described periods of market volatility (like what we're going through now) as dealmaking opportunities.

"Our experience has been in prior volatile periods, volatile times are good for us as a competitor in looking at making new investments, because the strength, scale, track record, as I said 25 years, are more important than ever as prospective affiliates focus on the partner that they're bringing on board as a potentially permanent partner," Dalton said. "Put aside one quarter here or there, I think the secular opportunity for us is to continue to invest in just great manufacturing businesses, great boutique affiliates, I think is strong as ever."

Also, in response to a question from KBW analyst Robert Lee, Dalton offered a reminder of what AMG looks for in deal targets.

"We're looking for firms that we think have the ability to grow in this environment and the environments we expect to come," Dalton said. "Some of that is the orientation of the principles of the firm, right. what are they trying to achieve. Some of it is, what can they achieve on their own, and some of it is what can we do together."

"We are looking for more complete firms, I'll say it that way, in terms of orientation to grow and evolve the capability set that allow them to grow and evolve," Dalton added. "But we're also still attracted to firms that are really doing one thing, they're doing it very, very well, but we have the opportunity, and this is the part that I think has evolved a bit over the past couple of years. We have the ability to work with that firm in ways that are additive to the whole."

Yesterday West Palm Beach, Florida-based AMG reported Q3 2018 economic earnings per share of $3.45 and revenue of $601.3 million, beating EPS expectations by $0.03 but missing revenue expectations by $2.85 million. AUM rose 0.66 percent to $829.6 billion on September 30, thanks largely to market gains.

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