OPPOSITE DIRECTIONS – Forstmann-Leff Retrenches, while WestAM Reaches Out
WestAM recently became the latest of a series of European asset managers to expand its role in the US market, acquiring the private equity business of Forstmann-Leff International.
Opposite Direction
WestAM began its US expansion last year with the acquisition of Houston-based Criterion Investment Management, a $9.6 billion fixed income manager.
Forstmann-Leff, meanwhile, decided to refocus on core equity and alternative asset products, having sold their fixed income group earlier this year.
As part of the latest transaction, Donald W. Phillips, former president of Forstmann-Leff, joined West AM as CEO of WestAM (U.S.) LLC.
In an interview with PLANSPONSOR.com , Phillips outlined an ambitious growth strategy for West AM. “We’re very close to a deal with an international EAFE-style management firm”, the next step in their expansion plans, according to Phillips.
They’re also looking to identify and acquire a US equity manager. With a dozen or so firms already “in their line of sight”, Phillips identified key criteria as:
- Growth focus
- Managing $1-$5 billion in assets
- 10-year history, with a good track record
- Match with West AM’s style/mix
“We’re interested in a small to medium-sized manager with the potential to grow to large,” said Phillips.
More Than Money
Not surprisingly, when asked about the potential for private equity investments, Phillips was optimistic. “The money going in is beginning to match the ideas”, he noted. “The current opportunities will draw the best people from the B-schools. They’ll generate new ideas, and those ideas need money.”
Access to private equity investments is more than a function of money, according to Phillips. In fact, he asserts that investors, particularly those in the middle market aren’t able to invest as much as they would like.
Even when firms are willing to take the money, they frequently can’t put it all to use at once, effectively leaving the funds uninvested.
“There’s a certain level of self-regulation if you’re a general partner in a VC (venture capital) firm.” At some point an investment can become a large cap buyout partnership, rather than an investment.
Most institutional investors aren’t interested in crossing that line – a concern shared by many a start-up venture interested in funding, but not management.
That’s where a relationship with the company, or a relationship as an investor can obtain access, where money alone couldn’t, according to Phillips.
Phillips, who was chief investment officer at Ameritech from 1984 through 1990, will continue to be based in Chicago.
Following completion of this transaction, WestAM will employ 80 people in four locations across the U.S. WestAM currently manages some $33 billion for more than 500 institutional clients worldwide.