Man Group is to acquire London-based hedge fund research and investment specialist Financial Risk Management (FRM) in a deal worth up to USD82.8million.
Once the acquisition is completed, which is expected to be before the end of Q3 2012, FRM will be incorporated into Man’s existing Multi-Manager business leaving the new combined business with USD19 billion assets under management.
The FRM brand will be maintained, but according to a statement released by Man, the company expects to make savings of up USD45 million a year from ‘operational synergies’.
No consideration will be paid up front. The contingent consideration which will be paid over three years comprises: a maximum of USD82.8 million in cash, net of total net assets acquired (subject to post-closing balance sheet adjustments) and dependent on asset retention and; a 47.5% share of performance fees attributable to FRM’s existing funds under management over three years, subject to a cap.
Peter Clarke (pictured), Man Group chief executive, says: “This transaction provides us with the opportunity to significantly improve the profitability of our multi-manager business. By combining the complementary investor bases of the two businesses and pairing FRM’s well regarded investment process with Man’s managed accounts infrastructure, we can increase revenues with no material change to Man’s current cost base. The transaction has been structured so that the consideration adjusts in line with asset retention, to ensure an attractive return for our shareholders.
“Luke Ellis’s previous role as Managing Director of FRM will assist rapid and efficient integration and delivery of the benefits of the combination to investors, globally. We are delighted to be further strengthening our relationship with Sumitomo Mitsui Trust Bank through a long-term strategic partnership in Japan."