Asset Management Valuation Quarterly Update

Transcription

1 Asset Management Valuation Quarterly Update Q A publication from PwC s Deals practice

2 Financial Services Industry Asset Management Valuation Quarterly Update Recent Market Developments & Trends For the full year 2015, the S&P 1500 Asset Management & Custody Banks Index decreased by 11.6% as compared to the S&P 500 Index, which decreased by 0.7%. The combined assets of the nation s mutual funds decreased by $292 billion, or 1.8%, to $15.7 trillion in December 2015, according to the Investment Company Institute s survey of the mutual fund industry. US equity funds net outflows for 2015 totaled approximately $170 billion, the largest outflows observed since the 2008 financial downturn. International equity funds saw two consecutive months of outflows in November and December, but for the full year 2015 saw net inflows of approximately $94 billion, despite the MSCI World Index being down 4.0% for the year. For the month of December, taxable bond funds saw the highest amount of net outflows totaling $33 billion and finished the year with total outflows of approximately $40 billion. 10,000 5, ,000 10,000 15,000 20,000 25,000 30,000 US Net Fund Flows vs. S&P 500 Return 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 20,000 16,000 12,000 8,000 4, ,000 8,000 12,000 16,000 International Net Fund Flows vs. MSCI World Index Return 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Domestic Equity Flows S&P Monthly Returns International Fund Flows MSCI World Index Monthly Returns Trading market data and transaction observations The market capitalization of most of the asset management companies listed below decreased for the full year 2015, with the exception of Wisdom Tree Investments, The Blackstone Group, Ares Management, and Northern Trust, which saw their market capitalization increase by 3.7%, 4.2%, 0.6%, and 5.0%, respectively. In a challenging fund flows and market performance environment, only a handful of asset managers saw year over year increases in assets under management ("AUM") including T. Rowe Price, Eaton Vance, Janus Capital, Wisdom Tree Investments, The Blackstone Group, Oaktree Capital, and Apollo Global. Excluding acquisitions, only Eaton Vance, The Blackstone Group, and saw positive organic AUM growth for the year. Asset managers across all sub-segments (diversified, fund, alternative) saw consistent average declines in market capitalization of approximately 24% for the year. The custody bank sub-segment saw an average decline in market capitalization of approximately 5.0% for the year. From a valuation perspective, average forward earnings multiples for the diversified asset manager sub-group remained relatively flat year over year, while declining, on average, by 22%, 20%, and 10% for the fund manager, alternative asset manager, and custody bank sub-segments. In the fourth quarter of 2015, there were three transactions announced or closed within the asset management industry with deal values of $75 million or greater. There were no publicly disclosed deal multiples for these transactions. Top US Asset Management Constituents (1) Market Capitalization ($ B) Assets under Management ($ B) Price / AUM (%) Price / Forward Earnings Company 12/31/2014 9/30/ /31/ /31/2014 9/30/ /31/ /31/2014 9/30/ /31/ /31/2014 9/30/ /31/2015 Diversified Asset Managers BlackRock, Inc ,652 4,506 4, Affiliated Managers Group Inc Legg Mason Inc OM Asset Management plc NA NA Virtus Investment Partners, Inc Sub-Group Average x 13.0x 13.9x Fund Managers Franklin Resources, Inc T. Rowe Price Group, Inc Invesco Ltd AllianceBernstein Holding L.P Eaton Vance Corp Federated Investors, Inc Janus Capital Group, Inc Waddell & Reed Financial, Inc WisdomTree Investments, Inc Artisan Partners Asset Management Inc Cohen & Steers Inc GAMCO Investors, Inc NA NA Calamos Asset Management Inc Manning & Napier, Inc Sub-Group Average x 13.7x 14.4x Alternative Asset Managers (2) The Blackstone Group L.P KKR & Co. L.P Oaktree Capital Group, LLC Apollo Global Management, LLC Lazard Ltd The Carlyle Group LP Ares Management, L.P NA NA Och-Ziff Capital Management Group LLC Fortress Investment Group LLC NA NA Sub-Group Average x 9.3x 9.3x Custody Banks The Bank of New York Mellon Corporation ,710 1,625 1, State Street Corporation ,448 2,203 2, Northern Trust Corporation Sub-Group Average x 14.2x 15.0x Average x 12.3x 12.9x Median x 12.5x 12.9x Fourth Quarter Transactions in the Asset Management Industry (3) Acquirer Target Mirae Asset Securities Co., Ltd. KDB Asset Management Co. Conning & Company, Asset Management Arm Octagon Credit Investors, LLC TA Associates Management, L.P.; Reverence Capital Frank Russell Company Close Announce Purchase Price ($ M) P/AUM (%) EV / EBITDA Price / Earnings - 12/24/2015 2,098 NA NA NA - 11/5/ NA NA NA - 10/8/2015 1,150 NA NA NA Average NA NA NA (1) Market data provided by Capital IQ, Inc. (2) IIncludes manager shares in market capitalization calculation. (3) Transaction data provided by Capital IQ, Inc. Selection criteria: (i) Target is a participant within the asset management industry, (ii) transaction was announced or closed between 10/1/2015 and 12/31/2015, (iii) total transaction value is greater than $75 million, and (iv) Percent sought is greater than 50%. (4) Certain financial data marked as "NA" was not available as of the publication date.

3 Financial Services Industry Asset Management Valuation Quarterly Update (continued) Top Asset Management Constituents by Geography (1) Company Price / AUM (%) Market Capitalization ($ B) Assets under management ($ B) Price / Forward Earnings 6/30/2015 9/30/ /31/2014 6/30/2015 9/30/ /31/2014 9/30/ /31/ /31/ /31/ /31/ /31/2014 6/30/2015 9/30/ /31/2015 United States BlackRock, Inc ,652 4,721 4,506 4, State Street Corporation ,448 2,374 2,203 2, The Bank of New York Mellon Corporation ,710 1,724 1,625 1, Northern Trust Corporation Invesco Ltd Franklin Resources, Inc T. Rowe Price Group, Inc Legg Mason Inc Affiliated Managers Group Inc AllianceBernstein Holding L.P Federated Investors, Inc The Blackstone Group L.P Eaton Vance Corp OM Asset Management plc NA Janus Capital Group, Inc Lazard Ltd The Carlyle Group LP Apollo Global Management, LLC KKR & Co. L.P Waddell & Reed Financial, Inc Artisan Partners Asset Management Inc Oaktree Capital Group, LLC Ares Management, L.P NA NA Fortress Investment Group LLC NA NA Cohen & Steers Inc WisdomTree Investments, Inc Virtus Investment Partners, Inc Och-Ziff Capital Management Group LLC GAMCO Investors, Inc NA NA Manning & Napier, Inc Calamos Asset Management Inc Sub-Group Average x 12.3x 12.9x Canada IGM Financial Inc NA NA CI Financial Corp NA NA Fiera Capital Corporation NA NA AGF Management Limited NA NA Guardian Capital Group Ltd NA NA Canaccord Genuity Group Inc NA NA Sub-Group Average NA NA 13.4x 11.7x 12.5x Europe UBS Group AG ,578 2,807 2,639 NA NA Amundi Asset Management ,016 1,004 NA NA NA NA NA NA NA NA 13.4 Schroders plc NA NA NA NA Aberdeen Asset Management PLC NA NA 12.5 NA 12.8 Henderson Group plc NA NA NA NA Man Group plc NA NA NA NA Ashmore Group PLC NA NA NA NA Jupiter Fund Management Plc NA NA NA NA Sub-Group Average NA 13.8x 13.5x 14.5x Africa / Middle East Investec Limited NA NA Coronation Fund Managers Limited NA NA Sub-Group Average NA 15.6x 11.2x 10.6x Asia-Pacific BT Investment Management Limited NA NA Platinum Investment Management Limited NA NA NA NA Value Partners Group Ltd NA NA NA NA Sub-Group Average NA 18.6x 15.5x 19.6x Average x 12.6x 13.4x Median x 12.4x 13.0x (1) All financial data obtained from Capital IQ. (2) Certain financial data marked as "NA" was not available as of the publication date.

4 Financial Services Industry Asset Management Valuation Quarterly Update (continued) Purchase Price Allocation Benchmarking - Transactions in the Asset Management Industry (1) Allocation of Purchase Price As a Percentage of Excess Consideration (2) Target Closing Purchase Price ($ MM) Goodwill Total Intangible Assets Trade names / trademarks Customer Relationships Management Contracts Other (3) KDB Asset Management Co. TBD 2,097.8 NA NA NA NA NA NA Octagon Credit Investors, LLC TBD NA NA NA NA NA NA Frank Russell Company TBD 1,150.0 NA NA NA NA NA NA First Eagle Asset Management LLC 1-Dec ,000.0 NA NA NA NA NA NA Quilter Cheviot Limited 25-Feb % 49.7% 2.6% 47.1% 0.0% 0.0% Dorsey Wright & Associates, Inc. 30-Jan % 56.0% 42.9% 11.5% 0.0% 1.6% Frank Russell Company 3-Dec , % 75.7% 34.0% 40.1% 0.0% 1.5% Geneva Capital Management 1-Oct % 60.8% 0.0% 0.0% 56.1% 4.7% Nuveen Investments Inc. 1-Oct ,250.0 NA NA NA NA NA NA Ignis Asset Management 1-Jul % 66.5% 0.0% 66.5% 0.0% 0.0% F&C Asset Management 7-May , % 28.0% 0.0% 10.2% 17.9% 0.0% Scottish Widows Investment Partnership Ltd. 1-May , % 63.4% 0.0% 0.0% 63.4% 0.0% Chartwell Investment Partners 5-Mar % 35.9% 0.0% 35.9% 0.0% 0.0% Atlantic Trust Advisors, Inc. 6-Jan % 51.7% 0.0% 51.7% 0.0% 0.0% Jovian Capital Corporation 1-Oct % 62.5% 0.0% 45.0% 17.5% 0.0% Artio Global Investors Inc. 21-May % 59.8% 0.0% 0.0% 59.8% 0.0% Epoch Investment Partners, Inc. 27-Mar % 22.9% 0.0% 22.9% 0.0% 0.0% Thomas Partners, Inc. 14-Dec NA NA NA NA NA NA Natcan Investment Management Inc. 4-Apr % 41.5% 0.0% 14.9% 26.6% 0.0% Claymore Investments Inc. 7-Mar % 60.6% 0.0% 60.6% 0.0% 0.0% Ashmore EEM, LLC 1-Jun % 44.9% 2.0% 42.9% 0.0% 0.0% Commercial Industrial Finance Corp. 13-Apr % 44.6% 1.2% 0.0% 43.4% 0.0% Henderson Group plc 4-Apr % 43.3% 0.0% 0.0% 43.3% 0.0% Rule Investments and Terra Resource Investment Management and Resource Capital Investment 4-Feb % 28.4% 0.0% 0.0% 28.4% 0.0% Acuity Investment Management Inc. and Acuity Funds Ltd. 1-Feb % 65.2% 0.4% 9.9% 54.8% 0.0% Rensburg Fund Management Ltd. 19-Jan % 69.0% NA NA NA NA BlueBay Asset Management plc 17-Dec , % 12.8% 0.0% 12.8% 0.0% 0.0% Hartford Investments Canada Corp. 15-Dec % 30.9% 0.0% 0.0% 30.9% 0.0% Windhaven Investment Management, Inc. 9-Nov % 31.3% NA NA NA NA Catella Brand AB 13-Sep % 24.7% 16.9% 7.8% 0.0% 0.0% Prairie Capital Management LLC 30-Jul % 37.6% NA NA NA NA Pantheon Ventures Ltd. 29-Jun % 57.0% 0.0% 57.0% 0.0% 0.0% Rensburg Sheppards plc 25-Jun % 40.8% 0.0% 40.8% 0.0% 0.0% Morgan Stanley Investment Management Inc., Retail Asset Management Business 1-Jun , % 73.0% 0.8% 4.6% 67.5% 0.0% BofA Global Capital Management Group, LLC, Certain Assets 30-Apr % 86.0% 6.2% 7.4% 72.3% 0.0% Highbury Financial Inc. 15-Apr % 53.9% 0.0% 53.9% 0.0% 0.0% Advisory Research Holdings, Inc. 1-Mar % 26.5% 1.4% 25.1% 0.0% 0.0% River Road Asset Management, LLC 24-Feb % 51.7% 0.0% 51.7% 0.0% 0.0% BlackRock Institutional Trust Company, N.A. 1-Dec , % 62.4% 7.7% 0.0% 54.7% 0.0% Insight Investment Management Limited Manulife Financial Corporation 2-Nov % 35.5% 0.0% 35.5% 0.0% 0.0% Credit Suisse Group, Certain Fund Management Assets and Businesses 30-Jun % 61.8% NA NA NA NA New Star Asset Management Group Ltd. 9-Apr % 58.6% 0.0% 0.0% 58.6% 0.0% Anima S.G.R.p.A 23-Jan % 30.5% 13.1% 0.0% 17.4% 0.0% Average 51.2% 48.8% 3.9% 22.9% 21.6% 0.2% Range of Useful Life (years) 2 to indefinite 5 to 15 4 to 9 4 to 7 Average Useful Life (years) (1) Includes acquisitions of asset managers with purchase price greater than or equal to $50 million and transaction close dates occurring between January 1, 2009 and December 31, (2) Excess purchase price defined as total consideration less net tangible assets acquired. (3) Other includes primarily acquired technology. (4) Certain financial data marked as "NA" was not available as of the publication date.

5 Contacts To have a deeper discussion about valuation developments and trends, please contact: James Marshall Principal james.marshall@pwc.com Nisha Sheth Principal nisha.sheth@pwc.com Earl Wallis Managing Director earl.wallis@pwc.com Jameson McNeill Director jameson.mcneill@pwc.com