Real estate wasn’t the only thing that went on sale during the recession. Asset managers are also getting snapped up at a discount, though top-notch boutiques, just like prime Manhattan apartments, still manage to fetch top dollar.
An exclusive Institutional Investor survey conducted by investment bank Park Sutton Advisors in New York revealed that buyers of asset managers paid a median of 9.45 times earnings before interest, tax, depreciation and amortization since the start of 2009, down from 10.62 times ebitda between 2006 and 2008.
Case in point: Ameriprise Financial paid 7 times ebitda for Columbia Management Group last year, says Steve Levitt, managing director and co-founder of Park Sutton. Such a manager would likely have fetched an earnings multiple of 12 to 13 before the meltdown of 2008, he says. Also, buyers these days are paying less cash up front and linking the purchase price to performance.
“The flexible deal structure eliminates buyers’ concerns about overpaying, and motivates sellers to grow their businesses and maximize value,” says Levitt. Smaller, profitable specialists with deep benches of investment professionals, good performance and broad client bases seem to be writing their own tickets: Affiliated Managers Group last month bought mutual fund outfit Highbury Financial for a nifty 14.61 times ebitda.
