Back in 2005, the chances that Amvescap, now Invesco, would make a 360-degree turnaround seemed virtually impossible, but with a little bit of time and the addition of Martin Flanagan as chief executive officer, the unlikely actually occurred, Institutional Investor reports.
It may have been luck, talent, or perhaps a combination of both, but after the former protégé of renowned investor Sir John Templeton took the reins of Amvescap, loyal investors have witnessed the companys stock price more than double and trade at roughly 15.7 times ahead of estimated one-year forward earnings. Not exactly bad for just three years in the job, but it was no walk in the park, either.
So, how exactly did Flanagan manage to overcome a trend of poor performance, recover from the scarlet letter that was a role in the 2003 mutual fund trading scandal, and ultimately reposition Invesco for a better future?
He broke the mold, and made some difficult choices along the way.
The old Amvescap was a holding company of asset managers. Basically what happened was you bought a business and there was little change in its life after becoming part of Amvescap, Flanagan said. That simply had to change.
For starters, Flanagan slashed management, restructured several aspects of the firm, and relocated the global headquarters from rainy, dismal London back to the firms original home in Atlanta. He even rebranded the company by changing name back to Invesco last May.
Flanagan had the difficult task of letting people go, and fired many employees himself.How many people were fired is sensitive subject for the CEO, who said, I havent counted, and I dont want to.
Flanagan also decided to make former CEOs of every Amvescap company a division head reporting directly to him.
Bob Yerbury, the former CEO and CIO of Invesco Perpetual in London, and a now senior managing director of Invescos European operation recalled, We went through all the turmoil of coming together. You go through a lot of pain doing that.
Overcoming the soiled reputation of the 2003 mutual fund scandal was one of Flanagans biggest obstacles, especially because Amvescap saw around $60 billion in net outflows between 2002 and 2005. Additionally, the charges former New York Attorney General Eliot Spitzer leveled against AIM Investments and Invesco Funds resulted in a $375 million settlement with the states of Colorado and New York.
Flanagan had no choice but to accept what had happened and look toward the future.
Cross-selling became a new priority, and a greater emphasis was placed on international growth. Eventually, the size of the companys non-U.S. client base doubled, which currently represents almost 40% of Invescos assets under management. Additionally, Flanagan expanded the firms product line by making several acquisitions, including private equity and exchange-traded funds.
When I first got here, every trend line you could think of was positioning in the wrong way, but in the past two years, you can see very strong operating results coming through, Flanagan said.
Since the end of 2004, assets under management have increased 26% from $382 billion to $480 billion as of the end of March. However, Flanagan managed to turn an after-tax loss of $2.29 billion in 2005 into a net profit of $673.6 million in 2007.
It is still [in the] early days, but the reality is that this is a company that went through some painful times, and his team came in, righted the ship and put the company on a course to realize its potential, said D.J. Neiman, an analyst at Chicago-based William Blair & Co.
There may have been some hiccups for Invesco, such as the loss of several members of a fixed-income team to its competitor, Deutsche Asset Management, but overall, Flanagan strongly believes that the best decision the firm has made was to avoid collateralized debt obligations and similar structured products that essentially led to problems in the market which began last summer.
In September 2006, Flanagan acquired ETF manager PowerShares Capital Management, which added $5.9 billion in assets, and in October of 2006 Invesco also acquired LBO, and WL Ross &Co, a restructuring firm which now has $6.7 billion in assets.
I was at first very skeptical because private equity is primarily a very entrepreneurial activity, but [Flanagan] has been very faithful in living up to the concepts of independence that we worked out in the deal, said Wilbur Ross.
Ultimately, Flanagan mainly focuses on the global progress of Invesco, but he remains optimistic that the company is now changing for the better. As we unlock the value of the global organization, Flanagan said, we will get the performance right, but it takes time.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.