Aberdeen Asset Management (AAM) yesterday hit the acquisition trail again, snapping up a US private equity specialist in a deal which will add more than $6 billion (£4bn) in assets under management.
The Scottish fund manager is buying Flag Capital Management, which operates from offices in Stamford, Boston and Hong Kong.
We believe that the acquisition is incrementally positivePeter Lenardos, analyst
AAM said the acquisition will position it as a leading global private equity and venture capital investor with more than 50 investment professionals.
No figure has been disclosed for the deal, but at 31 December, Flag managed assets of about $6.3bn of invested and committed capital. The business is focused on venture capital and small to mid-cap private equity in the US, and private equity in the Asia-Pacific region.
AAM’s wider alternative investments platform, overseen by Andrew McCaffery, will have total assets under management of $21.3bn following completion of the transaction. It said that Flag’s key market focus of US and Asia would complement AAM’s strength in Europe and offer clients a “compelling global proposition”.
AAM, which now has almost $500bn under management, said Flag’s long-established presence across the institutional and high-net-worth client markets would also increase its exposure to the region and standing among family offices and public and corporate pension plans.
Chief executive Martin Gilbert said: “Institutional investors are increasingly looking towards alternative asset classes, including private market allocations, to diversify their portfolios and enhance returns.
“This transaction is in line with Aberdeen’s strategy of undertaking clear value-added acquisitions that will assist with accelerating business growth in this area.”
Gilbert said Flag brought major benefits in strengthening AAM’s private market capability by bringing additional Asian expertise and new US resource.
“Secondly, Flag deepens and expands our US client base, which is a key growth market for Aberdeen.”
The transaction, which is currently expected to close in the third quarter of this year, is subject to regulatory approval from the Hong Kong Securities & Futures Commission and the Department of Justice and Federal Trade Commission in the US.
Peter Lenardos, an analyst at RBC Capital Markets, said the lack of a deal value meant he was unable to comment on the economics of the transaction, but said: “We believe that the acquisition is incrementally positive as Aberdeen expands both its pan-alternatives capability and presence in North America.”
Earlier this month, AAM blamed weak investor sentiment for a continued outflow of funds, with a net £11.3bn withdrawn by investors in the six months to 31 March. Gross new business inflows for the period totalled £23.4bn, a significant rise on the first half of 2014, but outflows amounted to £34.7bn, substantially higher than a year ago. Revenue in the first half rose by 20 per cent to £605.2m, while underlying pre-tax profit was 25 per cent higher at £270.2m. The company said the figures had highlighted the benefits of its acquisition of Scottish Widows Investment Partnership last year.
The Flag acquisition, which Pakenham Partners advised Aberdeen on, is the second deal this year aimed at strengthening the group’s alternative investments offering. In March, AAM agreed to buy SVG Capital’s stake in their joint venture vehicle, Aberdeen SVG Private Equity Managers, for £29m.