Private function
Share
Last week, Jupiter became the latest fund management business to join the private equity fold. Executives negotiated an MBO with the firm in conjunction with US private equity group TA Associates, with a sale price of £740m agreed with Commerzbank.
The deal brought to an end almost a year of speculation, with Jupiter joint chief executive Edward Bonham Carter believed to have been in talks with a number of private equity companies and trade buyers.
The announcement of the MBO, which is set for completion in July, was quickly followed by a management shake-up, with Bonham Carter appointed chief executive of Jupiter Investment Management Holdings. Jonathan Carey, who has been joint chief executive with Bonham Carter since 2000, has been made group executive deputy chairman.
With another four members of Jupiter's team on the board, including fund managers Anthony Nutt, Philip Gibbs and John Chatfeild-Roberts, all the indicators are that Jupiter's management will be responsible for their own fate although the fact that TA has three members on the board cannot be overlooked.
Jupiter is, of course, not the first fund management firm to become involved in private equity purchases. Gartmore's managers completed an MBO last year alongside Hellman and Friedman to buy the investment management business from Nationwide Mutual Insurance Company.
Chelsea Financial Services managing director Darius McDermott says: "What these private equity deals have done for the likes of Jupiter and Gartmore is that they effectively secure the future of the group. Commerzbank has been looking to sell for a while, with a public listing their preferred offering. But there are always going to be concerns over the buyer until those details are revealed. For example, should Invesco have bought Jupiter for whatever reasons, then out of the door would come a stream of Jupiter's best talent looking for a new job."
McDermott says there were more concerns with the Gartmore deal. He says: "Gartmore did take the opportunity to cut costs, with some managers not invited into the equity scheme. By comparison, all of Jupiter's management were in favour of the MBO, with many of them having a share in the business. There were also no overlay issues. All in all, Jupiter's buyout just appeared a lot cleaner and less elongated in the public domain."
TA Associates has placed capital in 10 investments in Europe over the past five years but does the fact that private equity firms are in the game for the short term worry advisers?
BestInvest head of communications Justin Modray: "The thing with them is that they are looking for an exit strategy although in this case that may not necessarily apply. The idea is that they want to make a turnover in time, whether it be three to five years or 10 to 20 years. The bottom line is that all venture capitalists want to make a decent return over a certain period of time."
Bonham Carter was quick to sing the praises of his new partners in the private equity arena. He says: "Partnering with TA Associates, who have considerable experience in the asset management sector, now creates the right structure for the next stage of our growth. Jupiter has committed significant personal assets to take joint ownership of the business with TA, with employees also participating in equity ownership. This creates an unparalleled degree of certainty for our clients during the coming years as we seek to extend our share of existing and new markets,
"We have been looking into this for the past year and the result it is going to be more of the same for Jupiter as we continue to move into new areas such as continental Europe and the private client and hedge fund arena.
"TA Associates has a long track record in the asset management industry and they understand the philosophy of minority investment. More important, they are long-term investors, something which cannot be said about all private equity firms."
TA Associates managing director Ajit Nedungadi says: "Jupiter is a powerful brand in the UK fund management industry driven by an impressive record of investment performance and growth. The investment fits very well with TA's focus on growth businesses in targeted industries in the UK and on the continent."
With £19.2bn of assets under management and a wealth of talented managers who have a massive incentive to stay in the business, should advisers be happy with the deal and will their exposure to the fund company continue?
Hargreaves Lansdown head of research Mark Dampier says: "Considering that Commerzbank has been looking to sell its stake for some time, most recently with a float, this announcement really has put a smile on the faces of a a number of advisers and clients.
"It comes across as a transparent piece of business that will keep many of the top talent tied at the firm for some time to come. According to the firm, nothing is going to change and if that holds true, then there is no reason for advisers to change their positive attitude."
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
