EFG International has reached an agreement to acquire the total share capital of the fund of hedge funds manager Capital Management Advisors (CMA).
Bermuda-based CMA focuses on both managing fund of hedge funds, including utilizing innovative hedge fund related structures to meet clients' objectives, and research of hedge funds. As of December 31, 2005, CMA, which was founded by Sabby Mionis and Angelos Metaxa, had assets under management of approximately CHF 2.1 billion.
Approximately 50 per cent of the transaction consideration is paid initially, with the remaining consideration to be paid over a five-year earn-out period. The estimated total consideration values CMA at an estimated price-earnings-ratio below 10 based on estimated 2005 net profits of CMA. The targeted contribution to EFG International's 2006 net profits from CMA is CHF 20 million.
Since its foundation in 1997, Capital Management Advisors (CMA) has had a track record of consistent double-digit growth in both assets under management and profitability. As of 31 December 2005, assets under management were approximately CHF 2.1 billion. CMA has a superior investment performance track record anchored by expert, rigorous research capabilities with qualitative and quantitative coverage of over 2,500 US, European and international hedge funds.
In addition, CMA has an extensive expertise in developing and marketing structured products linked to funds of hedge funds. CMA is headquartered in Hamilton (Bermuda) and has ancillary research offices in New York and Geneva. Its clients include both European institutions and high net worth individuals.
CMA currently has 29 employees and key employees entered into longer term agreements effective from the date of closing. For more than 60 per cent of its current assets under management, CMA has been mandated by its clients to continue to manage the clients' assets for at least between three and twelve years.
Before the acquisition of CMA, EFG International had approximately CHF 5 billion of clients' assets invested in hedge funds and hedge fund related products. EFG International announced on February 1, 2006, that it was closely evaluating several potential acquisition opportunities and that it had been in discussions with two of these before the Initial Public Offering on October 7, 2005. CMA was one of these two potential acquisition opportunities. The transaction was expected to close on 13 February 2006.
'In the late nineties, motivated by a concern about over valued equity markets, EFG International was a pioneer amongst private banks in utilizing structured products and hedge funds offering clients attractive returns whilst limiting risk,' says Lawrence Howell, Chief Executive Officer of EFG International. 'This in-house expertise helped our clients protect their investments during the volatile equity markets of the years 2000 to 2002. Since then, clients' demand for other alternative investment opportunities such as hedge funds has further increased. The acquisition of CMA enhances EFG International's capabilities in this area further, offering management services in the fund of hedge funds area and hedge fund research capability. This is a highly strategic and synergistic acquisition.'
Rudy van den Steen, Chief Financial Officer of EFG International adds: 'This transaction is a perfect example of our acquisition philosophy which, in addition to the strategic and revenue synergies rationale, shows our commitment to pricing discipline and the use of longer than average earn-out payments ensuring continued alignment of interests of both parties.'
Sabby Mionis, Chief Executive Officer of CMA believes the transaction is a step towards building one of the largest and best performing fund of funds companies globally. 'Our strong research capabilities and track record combined with EFG International's entrepreneurial culture and expert structuring and distribution capabilities will enable CMA to offer a better product to a broader client base,' he says.
New York based Athelera LLC acted as exclusive financial advisor to CMA.
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