By Dylan Litt, Michael Lipsky, and Kyle Amelio (New York University), Ilya Korzinkin, Siddharth Sharma, Mihir Gupta, and Hugo Tay (University College London) | 20/04/2020
Overview of the Deal
Acquirer: Franklin Templeton
Target: Legg Mason
Estimated Value: USD $6.5bn
Announcement Date: 18/02/2020
Acquirer Advisors: Broadhaven Capital Partners, LLC and Morgan Stanley & Co LLC
Target Advisors: PJT Partners, J.P. Morgan Securities LLC
In February, Franklin Templeton announced a deal to acquire Legg Mason for $50.00 per share of common stock in an all cash transaction. The merged entity will assume approximately $2 billion of Legg Mason’s outstanding debt, creating a global investment manager with $1.5 trillion in assets under management.
This acquisition comes following recent trends of midsize firms suffering investor outflows due to the competition of lower fee passive funds and larger firms that could lower costs due to economies of scale. Legg Mason had come under pressure to cut costs and boost profits from key stakeholders, such as hedge fund Train Partners, who have a 4.5% holding. Franklin Templeton has also experienced a difficult period due to heavy outflows from their funds, such as the Tempelton Global Bond Fund, which saw $6.3bn in net redemptions in 2019.
This acquisition aims to create an expansive investment platform with complementary investment strategies for both institutional and retail clients across various key geographies. Franklin Templeton’s broadened product offering exposes them to new asset classes such as infrastructure, real estate and quantitative multi-asset solutions.
"This acquisition will add differentiated capabilities to our existing investment strategies with modest overlap across multiple world-class affiliates, investment teams and distribution channels, bringing notable added leadership and strength in core fixed income, active equities and alternatives." - Jennifer Johnson, president and CEO of Franklin Templeton
Company details (Legg Mason)
Legg Mason helps investors globally achieve better financial outcomes by expanding choice across investment strategies, vehicles and investor access through independent investment managers with diverse expertise in equity, fixed income, alternative and liquidity investments. Legg Mason’s investment affiliates operate with investment independence and have specialized expertise across asset classes and markets around the globe. The firm’s affiliates include: Brandywine Global, Clarion Partners, ClearBridge Investments, Martin Currie, QS Investors, Royce Investment Partners, and Western Asset. Legg Mason’s assets under management are $806 billion as of January 31, 2020.
Founded in 1899, headquartered in Baltimore, Maryland, United States
President and CEO: Joseph A. Sullivan
Number of employees: 3,300
Market Cap: $4.3bn
LTM Revenue: $2.9bn
LTM EBITDA: $0.6bn
LTM EV/Revenue: 1.82x
LTM EV/EBITDA: 8.81x