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Pendal (ASX:PDL) share price may boost on acquisition

The Pendal Group Ltd (ASX: PDL) share price may receive a boost on news of an acquisition. How will this affect the Pendal share price?
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Raymond Jang

Raymond is a Rask Investment Analyst. He has extensive experience in analysing and investigating businesses from his roles at a national accounting firm and at ASIC. Raymond is a Chartered Accountant and holds a Bachelor of Commerce from the University of NSW. His curiosity about the world and drive to find high-quality businesses is what gets him out of bed every morning. Outside of writing and investing, you will find Raymond playing football in a cage (trust us, it's more fun than it sounds) or at a park. If you enjoyed his analysis, check out our Rask services. You can connect with Raymond on Twitter or LinkedIn.
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The Pendal Group Ltd (ASX: PDL) share price may receive a boost on news of an acquisition. How will this update affect the Pendal share price?

Pendal is now one of Australia’s largest fund managers, with more than $100 billion invested across its business. It competes with the likes of Magellan Financial Group Ltd (ASX: MFG) and Platinum Asset Management Ltd (ASX: PTM).

PDL share price

Source: Rask Media PDL 2-year share price chart

Pendal acquires a value-oriented fund

Pendal announced it has entered into an agreement to fully acquire Thompson, Siegel & Walmsley (TSW), a US-based value-oriented investment management company, for US$320 million (A$413 million).

TSW operates primarily in long-only equity (US and International) with US$23.6 billion (A$30.5 billion) of funds under management (FUM).

Pendal notes the price is valued at 7.6x 1H FY21 earnings before interest, tax, depreciation and amortisation (EBITDA explained).

Is TSW any good?

TSW holds six funds and four of them have a 4/5-star Morningstar rating and rank in the top quartile over the last three-year period.

TSW appears to have a strong work culture with an average tenure of 12 years among the investment team personnel.

The investment company has a team of 74 employees and 20 represent the investment team.

How will the acquisition be funded?

The US$320 million purchase price will be funded through a combination of equity, debt, and existing capital.

Equity will be raised through a fully underwritten placement and a share purchase plan for retail shareholders.

My thoughts

It appears TSW has a sound investment team with a proven track record. I think it’s important to focus on the quality of the investment team in such circumstances.

The quality of the investment team will drive future growth for Pendal.

Whilst it’s encouraging to see that this will double Pendal’s total addressable market in the US, but investors should consider whether this will generate a high level of return on capital (ROC explained).

If you are interested in other ASX growth shares, I’d recommend signing up for a free Rask account to gain access to our stock reports.

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