L&G makes first US investment management acquisition
Legal & General has agreed to acquire the business of Global Index Advisors, an Atlanta based investment advisor focused on target date funds (TDF).
The acquisition, by the group’s subsidiary Legal & General Investment Management America, for a maximum consideration of $50.4m, is expected to complete mid 2014, subject to fund shareholder approval.
Legal & General has identified international expansion of asset management as one of its five key themes for growth, and with this acquisition LGIMA now has proforma assets which exceed $50bn.
The acquisition provides Legal & General with scale and distribution in the $6trn US DC market, where TDF assets are forecast to double by 2017.2
“This acquisition underlines the significant potential for Legal & General Investment Management (LGIM) to grow assets in the DC market in the UK and in the US and further position itself as a market leader in delivering innovative investment solutions,” the firm said.
GIA was formed in 1994 to create and market customer centric index target date fund products for the DC market and is investment sub-advisor to the Wells Fargo Advantage Dow Jones Target Date Funds which have $15.6bn of assets.
The initial consideration is $30.75m with deferred consideration of $1.5m payable over the period of 2 years from the date of completion and further payments of up to a maximum of $18.15m payable over 3 years from the date of completion, subject to performance and other conditions being met including additional assets.
The maximum cash consideration of $50.4m will be funded from surplus capital held within the Group. The acquisition is expected to be earnings accretive for Legal & General in its first year and is expected to deliver a return above the Group’s weighted average cost of capital.
Mark Zinkula, Chief Executive Officer, Legal & General Investment Management said:
“International expansion and the DC market are two extremely important drivers of future growth for LGIM, and the acquisition of Global Index Advisors today will allow us to accelerate our expansion in the US DC market. We are delighted to be working with Jim and his team who have been pioneers in this area and believe the opportunity to expand the business is significant.”
Jim Lauder, Chief Executive Officer, Global Index Advisors, Inc said:
“We are excited to become part of LGIMA and the Legal & General Group. Our business model has always been about partnering with industry leaders possessing a strong desire to do the right thing for customers. Wells Fargo is an example of that. The opportunity to work with a company of L&G’s calibre and character is a perfect fit for that strategy. L&G’s knowledge and resources will allow us to not only reach more customers, but give those customers more innovative retirement solutions.”
Wadham Downing, Group M&A Director, Legal & General said:
“We are delighted to announce our first US acquisition and our first in the asset management theme. GIA brings a new dimension to LGIMA and our US DC proposition. With today’s announcement on GIA, we have now agreed five bolt-on acquisitions in the last 12 months.”