Religare Enterprises, an Indian financial services group with a global emerging-market footprint, has announced it will acquire Landmark Partners, a pioneer in the US secondary private-equity market, for $171 million.
The announcement comes the same week as Religare Global Asset Management closed its first acquisition, Northgate Capital, another US firm.
That deal was first announced in February but took a long time to close because it was the first such outbound M&A deal from India, and the local regulators needed time to digest the process, says Shachindra Nath, group CEO at Religare in New Delhi.
Religare Enterprises has three legs to its business: an Indian integrated financial services business that includes brokerage, life insurance, mutual funds and non-commercial banking; an emerging-markets investment bank; and Religare Global Asset Management.
The company’s family owner, Malvinder Singh, has committed up to $1 billion to acquire asset-management boutiques in order to build a global multi-asset platform.
Religare’s first foray abroad came amid the 2008 crisis, when in early 2009 it bid to acquire AIG Investments. It also made bids for over 30 other asset managers that were in a position of distress, says Nath.
These attempts to buy a troubled but established major foundered for several reasons. First, the sellers or the companies in question weren’t keen to have an unknown name from India come in as the parent. Second, Religare’s management realised that it would struggle to turn these companies around; they were in distress for a reason.
Therefore the company changed tack and decided to build a multi-asset platform based around healthy, medium-sized specialists. Instead of trying to play the white knight, its approach is around partnering with these boutiques to give them the access to emerging-market capital and growth.
It is therefore looking for asset managers in the $3 billion to $25 billion AUM range with established track records. In other words, companies that are well regarded but which lack the scale to set up the infrastructure in emerging markets.
For example, Religare is helping Northgate open an office in Hong Kong and hire investment professionals from AIG Investments’ fund of private-equity funds. Northgate is also using Religare to open an office in India, and to source capital from Japan, where Religare has a distribution team.
Religare Global Asset Management is building distribution teams in Hong Kong, Singapore and Dubai. Its investment-bank affiliate has operations in Hong Kong, Singapore, Indonesia, Malaysia, Brazil and South Africa.
For a firm like Landmark Partners, the other option for fast growth would be a deal with a bigger rival, which would result in the firm being swallowed.
Religare takes majority stakes but leaves plenty of equity on the table for the existing partners. Nath says in the case of Landmark, Religare will take 55%. Moreover the transaction also sees the remaining 45% redistributed among the firm’s 14 partners (until now, the founders owned most of it) so that they are all incentivised to remain on board for seven years or more.
Nath says the strategy of going after a venture capital fund of funds (Northgate) and secondary PE (Landmark) was deliberate. These are illiquid investment strategies in which the limited partners are committed for many years.
Religare has a chance to now speak with these LPs (basically the LPs are a captive audience) and make them comfortable with it and its strategy.
From here it becomes much easier to acquire managers of liquid pools, including hedge funds, long-only equities and fixed income, says Nath.
“Over the next three years we are going to use the multi-asset platform to capture the shift of capital from West to East,” says Nath.
Landmark Partners manages 27 private-equity and real-estate secondary funds of funds, with $8.3 billion of committed capital. It is based in Simsbury, Connecticut.