Large private equity firms will likely be interested in Russell Investments, but PE isn’t a shoo-in to win the Seattle asset manager.
TA Associates and Reverence Capital Partners have put Russell up for sale after three years, sources said. Goldman Sachs is advising on the process, the Financial Times said.
It’s unclear how much TA and Reverence are seeking. Founded in 1936, Russell has $292.7 billion in assets under management and $2.3 trillion in assets under advisement.
TA and Reverence completed their $1.15 billion buy of Russell in June 2016. The London Stock Exchange Group was the seller.
Private equity didn’t have the easiest time acquiring Russell in 2015. The LSE ran a very broad process for Russell, sending out more than 50 books, Buyouts said in April 2015. “Everyone looked at it the last time,” one banker said.
PE firms including CVC Capital Partners and TA made it to the second round of the 2015 auction. TA only managed to buy Russell after the LSE’s talks with CITIC Securities unraveled, Buyouts reported.
This time around, strategics, most likely consulting firms, are the most likely buyers, the source said. This includes Mercer, Willis Towers Watson and AON Hewitt. Large private equity firms like KKR and Blackstone will also probably look at the asset manager, the person said.
“[Russell] has done very well with TA and Reverence. But I think they sell it to a strategic,” the source said.
TA and Reverence have already more than made back their investment. The PE firms committed $350 million equity to the buy of Russell in 2016, Buyouts reported at the time. TA ended up owning 66.7 percent of Russell, while Reverence has 33.3 percent, the story said. This means TA invested $233.5 million and Reverence the rest.
In 2017, Russell increased its secured debt by $200 million to $847 million and used the add-on to pay a one-time dividend to Russell’s PE holders, Buyouts said. Russell used the same method in May 2018 to pay out another dividend to its PE backers. This time the company boosted its existing $838 million in debt by $300 million, Moody’s Investors Service said.
A Russell spokesperson said the company does not comment on rumors or speculation. Reverence and Goldman declined comment. TA could not be reached for comment.
Action Item: See Reverence Capital’s latest form ADV here.