By Haozhe(James) Huang, Friedrich von Storch and Yujia Bao (IE Business School), Anna Muizniece, Simon Gustafsson and Knut Örnéus (Stockholm School of Economics)
Overview of the deal
Acquirer: Goldman Sachs
Target: NN Investment Partners
Total Transaction Size: $2.0 billion
Announcement Date: 18th August 2021
Expected Close Date: Q1 2022
Goldman Sachs has announced its agreement to acquire NN Group’s asset management arm for total cash proceeds of $2.0 billion. The deal consists of a base purchase price of $1.8 billion, a ticking fee and excess capital to be distributed in the form of a dividend before completion. As part of the agreement, NN Group and Goldman Sachs Asset Management will enter a ten-year strategic partnership where the new combined entity will continue to provide asset management services to NN Group.
The deal aligns with Goldman Sachs’ strategy of shifting its revenue stream from volatile trading and deal advisory to more dependable and recurring asset and wealth management fees. Upon competition, Goldman will double its assets under management in Europe from $335 billion to more than $600 billion. The Netherlands will also become Goldman’s significant location in Europe, with NNIP’s full integration into Goldman’s European asset management unit. Significant synergies will be created leveraging the complimentary global network of both companies, and Goldman Sachs’ strong capital position to fund growth opportunities.
“The combined investment expertise and scale will enhance the service offering to NN Investment Partners’ clients, including NN Group” - David Knibbe, CEO (NNIP)
Company Details: (Acquirer - Goldman Sachs)
The Goldman Sachs Group, Inc., is an American multinational investment bank and financial services company. It offers services in investment management, securities, asset management, prime brokerage, and securities underwriting across its 20 divisions.
Founded in 1869, headquartered in New York, United States
CEO: David M. Solomon
Number of employees: 40,800
Market Cap: $136.5bn (as of 09/08/2021)
LTM Revenue: $55.2bn
LTM P/E: 6.8x (as of 09/08/2021)
LTM P/B: 1.4x (as of 09/08/2021)
Company Details: (Target - NN Investment Partners)
NN Investment Partners is a Netherlands-based asset manager, with headquarters in The Hague and offices in Europe, Asia, and the Americas. It presents a diverse range of funds within fixed income, equity, multi-asset and alternatives investment strategies, integrating environmental, social and corporate governance (ESG) criteria throughout the investment process. As of June 2021, NN IP has had an AuM of €298bn, making it the third largest Dutch asset manager.
Founded in 1994, headquartered in The Hague, Netherlands
CEO: Satish Bapat
Equity value: $1,986m
Implied EV: $1,975m
LTM Revenue: $600m
LTM EBITDA: $102m
LTM EV/EBITDA: 19.3x
LTM P/E: 26.5x
Projections and Assumptions
The $2bn acquisition of NNIP, which is Goldman Sachs’ largest acquisition since David Solomon became CEO in 2018, has a clear underlying strategic rationale as the bank aims to shift its revenue streams away from volatile deal advisory and trading revenue to more dependable and recurring asset and wealth management fees. The deal follows the larger trend in the banking industry of diversifying revenue streams, which has led to a number of high-profile transactions with a similar rationale, including Morgan Stanley’s $7bn acquisition of Eaton Vance and $13 bn acquisition of E-trade in 2020 or JP Morgan’s $1bn acquisition of UK-based digital wealth management firm Nutmeg in June 2021.
As for NN group, the sale of NNIP will increase