In back-to-back deals Boston investment management firm Eaton Vance Corp. acquired majority stakes in two asset management firms in an effort to ramp up its separate accounts business and pump new products into the financial advice distribution channel.
The company acquired 80% of N.J.-based Fox Asset Mgt. for an initial payment of $32 million in cash and Eaton Vance stock on July 26. Then, last Thursday, the company bought 70% of Atlanta Capital Mgt. Co. for $75 million. Both deals are expected to close by Oct. 31.
In addition, the Fox deal provides for payments of up to $30 million in 2005 and 2006, depending on the company's future performance. Eaton Vance will have the option to purchase the remaining 20% of Fox in 2006 and 2007.
Eaton Vance struck a similar deal with Atlanta Capital, paying 80% of the initial $75 million in cash and 20% in stock. Eaton Vance will retain the option of purchasing the remaining 30% of Atlanta Capital in two stages, in 2007 and in 2009.
Executives at both of the newly-acquired companies will meanwhile hold minority stakes. Both companies will become subsidiaries of Eaton Vance and will operate as distinct business units. No management or staffing changes are expected.
The deals bring Eaton Vance's total assets under management to $58 billion, an increase of 16%, according to a statement issued by the company.
Both Atlanta Capital, a growth manager, and Fox, a value manager, have strong stakes in the pension fund and institutional spaces, while Eaton Vance has focussed on tax-managed funds, said Eaton Vance CEO Jim Hawkes in an interview with MFMN, the day the Atlanta Capital deal closed.
By purchasing majority stakes in the two companies, Eaton Vance will be able to use its advice-channel relationships to provide improved distribution to the smaller firms' skill-sets, he said.
In addition, Eaton Vance was attracted to the deals partly because both companies have strong separate accounts businesses, Hawkes said. Before the acquisitions Eaton Vance had garnered $3 billion in managed account assets, half with institutional and half with high-net-worth investors, he said. Fox brings an additional $2 billion in managed account assets into the Eaton Vance fold while Atlanta brings in $6.5 billion. That ramps Eaton Vances' total managed account assets to $11.5 billion.
"These two firms give us a strong way to participate in that growth area with broker-dealers who we have strong relationships with," Hawkes said in an interview on Thursday.
Eaton Vance executives worked into Thursday morning polishing the Atlanta Capital deal, Hawkes said. He does not foresee any new deals in the near future, but said the company is certainly looking to expand into the international separate account markets, which may lead to additional acquisitions.