Barrow Hanley

Oct 24, 2022

Share MST Emerging analysts are back for another shot at Perpetual’s bid to buy Pendal, this time casting doubts about the company’s recent acquisition track record. Two years ago, Perpetual acquired US-based asset managers Trillium, a specialist ESG investment firm, and Barrow Hanley, which had strategies across US, global and emerging markets equities and fixed income. Perpetual’s board and management team, headed by Rob Adams, is using acquisitions to try to get bigger. However, not everyone is convinced it is a winning strategy. James Brickwood Both businesses helped diversify the Australian born-and-bred manager offshore, but MST wonders whether they’ve worked for Perpetual’s investors. MST, which offers sell-side research and trading to institutional investors, said the acquisitions cost about $500 million including integration costs and Perpetual had seen about $10 billion in outflows since they were integrated. The outflows continued in the recent September quarter update, the analysts said, which put pressure on earnings. Advertisement “Of more concern, is that we are now forecasting PAMI (the international business made up of BH + Trillium) to deliver ~$33m EBITDA in FY23, significantly below the $56m seen in FY22, driven by lower average FUM, but more so, the higher investment PPT is making in the business,” the analysts headed by Lafitani Sotiriou told clients in a note on Monday morning. “If we then account for the roughly $8m additional Group cost that came from the businesses, the two acquisitions are tracking towards ~$25m EBITDA contribution in FY23, which is a whopping 20x EV/EBITDA based on the acquisition price paid (and compares to PPT currently trading on around 4x).” Trillium had $US3.8 billion ($5.5 billion) in funds under management in January 2020, when Perpetual signed its deal, while Barrow Hanley $US44.1 billion ($63.9 billion) on signing in July 2020. The managers had $7.4 billion and $61.6 billion respectively at June 30, according to Perpetual’s FY22 results.