A fan of track and field, Credit Suisse’s Joseph Hershberger likes to watch sprints from high up in the stadium to put the runners in proper perspective. He takes a similarly Olympian view as a banker who has fashioned some of money management’s biggest mergers.
Consider the events of last spring. Britain’s Barclays had agreed to sell iShares, the exchange-traded-funds business of its asset management arm, Barclays Global Investors, to London-based private equity firm CVC Capital Partners for $4.4 billion. Hershberger reflected on the larger picture of consolidation in the fund management industry. In his conversations with BlackRock CEO Laurence Fink, the pair came to the conclusion that the big fixed-income specialist should make a rival bid for all of BGI.
“Investors have gravitated toward asset management firms that are large enough to offer a full spectrum of strategies,” explains Hersh-berger. “A combined BlackRock/BGI would offer investors customized, soup-to-nuts product solutions that range from index and active equity to hedge funds.” BlackRock, and Fink, concurred.
Working with Fink’s long-term deal adviser, Citigroup’s Gary Shedlin, Hershberger hammered out a deal under which BlackRock agreed to acquire BGI — iShares included — for $13.5 billion in cash and shares last June. The deal, which closed in December, gave Barclays a 19.9 percent stake in BlackRock. It was the largest-ever merger of asset managers and produced a behemoth with $2.8 trillion of assets, the most of any investment firm worldwide.
“Joe has a deep understanding of the industry,” says Richard Prins, a Skadden, Arps, Slate, Meagher & Flom partner who worked alongside Hershberger and Shedlin in advising BlackRock on legal issues. “He specializes in investment management and knows what works and what doesn’t.” (CVC’s deal to buy iShares had a “go shop” clause that allowed BlackRock to step in.)
Hershberger, 47, has been advising investment managers for two decades. After graduating from Northwestern University in 1985 with an honors degree in economics, the Fort Wayne, Indiana, native joined Drexel Burnham Lambert as a financial services analyst. In 1990, after Drexel went bankrupt, Hershberger signed on with Putnam Lovell, a small New York investment bank specializing in investment industry mergers that is now part of Jefferies & Co.
His market timing was a lot better than that of most money managers: As retail investors embraced stocks and 401(k) plans flourished, the investment industry burgeoned and banks wanted to be in on the bonanza. Hershberger had a deal for virtually every one of them. For instance, in the late ’90s he helped American Century Investments of Kansas City, Missouri, sell a chunk of itself to J.P. Morgan & Co.
The following decade presented an edgier sort of opportunity. Along with arranging mergers, Hershberger also found himself undoing some of the previous decade’s tie-ups between investment managers and now-disillusioned banks and insurance companies. For example, he counseled Swiss Reinsurance Co. on its sale last year of Conning & Co., an asset manager it had acquired in 2001, to private equity firm Aquiline Capital Partners.
Hershberger also plunged into alternatives, the decade’s other noteworthy investment trend. In one of the earliest such deals, he advised Greenwich, Connecticut, hedge fund AQR Capital Management in 2004 to sell a minority stake to Affiliated Managers Group, a gatherer of midsize investment firms.
Hershberger moved to Credit Suisse in 2007 and has elevated the Swiss bank to the top ranks of asset management M&A (alongside Citigroup and Goldman, Sachs & Co.). He has completed more than 60 major deals during his career and is by no means done. He expects his deal quota to double this year as more midsize money managers consolidate. Alternatives M&A should pick up, too, he adds, as hedge funds again sell stakes to larger firms. “Clearly, it is a challenging time for alternative managers,” Hershberger asserts. “But I’m a big believer in the long-run potential of alternatives.”
