Fiera Capital is set to acquire Integrated Asset Management (IAM) for $74 million, the latest in a string of mergers that highlight just how integral alternative credit has become to asset managers of all stripes.
Toronto-based IAM announced on Thursday that it had entered into a definitive agreement with Fiera for the latter to acquire all of the former’s outstanding stock, pending a successful shareholder vote. The transaction values IAM at $64 million and includes an additional $10 million of adjusted cash.
If passed, IAM stockholders have the option to receive either a cash payment, stock consideration or a combination of the two.
Specifically, IAM shareholders have the option to receive $2.576 in cash for each IAM share they own; Fiera shares worth $2.576, based on the volume-weighted average trading price of the Fiera stock on the Toronto Stock Exchange five days prior to the transaction close; or a combination of a $1.932-a-share cash payment and a fraction of Fiera stock calculated using the same VWA number above divided by $0.644 per share.
Share consideration cannot exceed $18.5 million.
IAM shareholders would also receive contingent value rights from Fiera based on incentive fees from two IAM-affiliated real estate funds that will mature after the proposed transaction would close.
This decision marked the next logical step for IAM, Philip Robson, the president of private debt at the firm, told Private Debt Investor.
“We knew that we were rapidly approaching the place where the next step in our lives, and in the development of the company, was that we needed to be on a much larger platform,” Robson said.
He added that IAM had grown a substantial base of institutional investors in Canada and is looking forward to fostering new relationships and connections through Fiera’s existing relationships.
He said that IAM has received multiple offers throughout the years, but that Fiera really made the most sense because it had a similar company culture as IAM, and because IAM’s portfolio will complement Fiera’s portfolio. It currently does not operate a similar strategy.
John Valentini, the president and chief executive of Fiera Private Alternative Investments, echoed that statement. Valentini told Private Debt Investor that IAM’s portfolio is a great addition to Fiera’s because of IAM’s experience with long-term loans and its real estate strategy.
Fiera offers public equities and traditional fixed income investments. On the alternative asset side, the firm manages hedge funds and oversees agriculture and infrastructure products.
“For our private lending business, this will allow us to offer loans along the maturity spectrum,” Valentini said. “This transaction transforms Fiera Private Lending into a leading pan-Canadian non-bank private lending platform.”
This transaction came at the right time for Fiera as well, Valentini said, because this transaction will help the firm move closer to its goal of having 10 percent of its AUM and 25 percent of its global revenue in alternative investments.
The merger was recommended by an independent committee and passed unanimously through the IAM board of directors.
IAM expects the shareholder vote to be held in May. Two significant shareholders of the entity who together own 52.6 percent of the total outstanding IAM shares are in hard lock-up agreements and plan to vote in favour of the transaction. Two-thirds of stockholders must sign off on the transaction for IAM to win approval of the deal.
“From a personal standpoint, looking forward, the wealth of personal growth for the younger members on the team is a very heartwarming thing to see,” Robson said.
The deal is another in a string of acquisitions of credit managers, showcasing that alternative credit is a must-have for firms that wish to offer a full suite of investment products.
Franklin Templeton, the asset management behemoth specialising in traditional investments, purchased Benefit Street Partners from Providence Equity Partners in October, while BlackRock purchased Tennenbaum Capital Partners in April of last year.
In perhaps the most high-profile transaction, Brookfield Asset Management snapped up Oaktree Capital Management earlier this month.
“Their purchase of Oaktree in that context is a very logical progression of private credit through asset-gathering,” one investment banker told PDI. “Independent private credit franchises will be very valuable in this environment.”
IAM is a global asset management firm. It was founded in 1998 and has more than $3.1 billion in assets under management. Fiera is a global asset management firm headquartered in Montreal. It has more than C$136.7 billion ($102.51 billion; €89.97 billion) in AUM.