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Blackstone Group Invests in Money Management Company

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July 22, 2015

 

Private equity firms haven’t been very active in acquiring money management companies in the past few years, but Blackstone Group has now broken the trend. The firm made a big investment this week, as it bought First Eagle together with Corsair Capital.
The Deal

 

The private equity firm bought a majority stake in First Eagle Investment Management with the global investment firm. The deal saw the money management company valued at nearly $4 billion, including debt.

 

The company will continue to operate independently and it is likely the company will maintain a similar strategy to what it has been operating under to this day. According to the official statement, the investment is done through the holding company of First Eagle, Arnhold and S. Bleichroeder Holdings Inc.

 

The senior management and investment team will remain the same, with the two private equity firms focusing on company oversight. Blackstone Group and Corsair won’t participate in the day-to-day operations.

 

Joseph Baratta, Blackstone’s Global Head of Private Equity, said in the statement, “As investors with deep knowledge of the asset management space, Blackstone understands and respects First Eagle’s culture and investment philosophy, and we recognize that preserving these is critical to the long-term success of the Firm.”

 

Keen to Buy

 

Both Blackstone and Corsair had been keen to buy the money management company. Reuters first reported the interest in April. The company has been looking for a buyer for a while now, as it first hired Bank of America Corp to find a buyer in 2013.

 

The company has been in operation since 1864, with numerous financial operations under its belt. The company sold its banking business in 2002 and has since focused on money management.

 

The company’s Chairman and Chief Investment Officer, John Arnhold said in the statement, “The Family is pleased with the long-term stability that this investment provides the Firm and our clients.”

 

Furthermore, P. Andrews McLane from TA Associates said, “During this time of unprecedented market turbulence, we have been impressed with First Eagle’s prudent stewardship of its clients’ assets and we believe that it is well positioned to prosper in the future.”

 

First Big Deal for the Industry

 

Private equity firms have not been that keen to invest in money management companies in recent years. The previous deal by the big private equity firms took place in 2013. Carlyle Group acquired TCW Group from Societe Generale SA. The deal at the time was considered to undervalue the company’s operations.

 

On the other hand, the other investor in the First Eagle deal, Corsair, has been more active in the field. It bought a stake in Personal Capital Corp., the asset management company, in a fundraising round, which raised $50 million. Furthermore, it has been involved in backing MPC Capital in recent years. Corsair’s managing partner, D. T. Ignacio Jayanti, said, “Our investment is predicated on the belief that strategies offered by First Eagle will continue to be attractive to clients over the long-term.”

 

It remains to be seen whether other big private equity firms get interested in the sector once more.

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