With Power Financial Corp. acquiring Putnam Investments for $3.9 billion, it has succeeded in expanding its business into the U.S., but it also must turn around a company that has been bleeding assets for the past five years years, according to sister publication American Banker.
There is little prospect that the outflows will end soon. The Montreal financial services company might consider taking steps to reinvigorate the operation, such as changing management or a new distribution strategy, analysts say.
However, Power Chairman Robert Gratton said his company has no plans to bring significant changes to Putnam’s executive ranks, sales strategy or anywhere else.
“Flows are negative and will be negative for all of 2007,” Gratton said. “But things are starting to change on the institutional side, where we expect positive flows from net sales. The timing of when we become positive, whether it is the end of 2007 or the beginning of 2008, is really irrelevant. We are satisfied that the turnaround is there. Fund performance is growing stronger.”
Some agree that the deal will be a positive for Putnam.
“Putnam never fit strategically” with Marsh & McLennan Cos., Putnam’s parent company, said Clifford Gallant, an analyst with Keefe, Bruyette, & Woods. “Marsh had to focus on fixing their insurance brokerage operation. Putnam is still an organization with nearly $200 billion of assets, and it has a recognizable name. There clearly is value here that needs to be unlocked with a better management team,” Gallant said.
Gratton also said Power would look to continue acquiring business in the U.S. In the past year, it has brought businesses from MetLife and U.S. Bancorp, to develop its 401(k) retirement services business.