Hellman & Friedman’s $3 billion agreement to buy retirement services provider Financial Engines Inc. is one of the biggest deals yet in the investment management takeover boom.
The San Francisco-based private equity firm is paying $45 a share in cash for Financial Engines, according to a statement. Shares of the Sunnyvale, California.-based advisory firm rose 32 percent to $44.73 in New York trading.
Life insurers, asset managers and private equity firms are buying investment managers as the sector faces intense pressure to merge. Fees are falling as investors increasingly rely on on computers rather than people for money advice. The industry is also coping with costly new rules in the U.S. and Europe aimed at improving market transparency.
There were 208 asset management deals worth $21 billion in 2017, according to a research note in February from Sandler O’Neill & Partners, an investment banking firm. Combined deal values were up about 23 percent from the previous year.
The Financial Engines transaction is the fourth-largest takeover of an asset or wealth manager since the beginning of 2017, according to data compiled by Bloomberg.
The largest was Standard Life Plc’s merger with Aberdeen Asset Management Plc to form the U.K.’s largest active manager in a $4.5 billion deal. Behind that, according to data compiled by Bloomberg, were Jiangsu Shagang Co.’s proposal to buy Suzhou Qinfeng Investment Management Co. for more than $3 billion and Softbank Group’s $3.1 billion cash deal for Fortress Investment Group LLC.
Last week, Standard Life Aberdeen Plc’s money manager, Aberdeen Standard Investments, acquired the U.S. business of ETF Securities, which specializes in precious metals and commodity exchange-traded products and has about $2.8 billion in assets. In December, Nippon Life bought an almost 25 percent stake in Los Angeles-based money manager TCW Group Inc. from Carlyle Group LP in a deal valued at 55 billion yen ($500 million).
$1.2 Trillion Assets
Financial Engines primarily helps companies offer their employees 401(k) plans, individual retirement accounts and other types of savings plans. As of Dec. 31, it provided those services to more than 700 employers, representing about 9.8 million workers and more than $1.2 trillion in assets, according to its annual report. It also manages more defined contribution accounts than rivals including Morningstar Inc.and Fidelity Investments, according to an investor presentation in February.
The company earned $47 million last year, or 63 percent more than in 2016, as its purchase purchase of the Mutual Fund Store drove revenue higher.
Co-founded in 1996 by economist William Sharpe, Financial Engines went public in 2010.
Hellman & Friedman has a history of investing in money managers. In the past it has owned stakes in Artisan Partners Asset Management Inc., LPL Financial Holdings Inc. and Franklin Resources Inc., according to Hellman & Friedman’s website.