I believe the Macquarie Group Ltd (ASX: MQG) share price could be a better buy after US acquisition expansion news.
Macquarie’s acquisition
Macquarie announced yesterday that it’s going to acquire all of the shares of NYSE-listed, US-based asset and wealth manager Waddell & Reed Financial for US$1.7 billion, or $2.3 billion in Australian dollar terms.
Waddell & Reed Financial, which has provided wealth services since 1937, has two major segments. It has an asset management business with approximately US$68 billion in assets under management (AUM) and a wealth management business with approximately US$63 billion of assets under administration (AUA).
Macquarie said that increased scale and diversification of a combined platform will create significant long term benefits for clients, advisors and shareholders.
After the deal is completed, Macquarie will sell the wealth management business to LPL Financial Holdings for US$300 million plus excess assets. A long term partnership between Macquarie and LPL will provide continuity for the existing wealth business and clients as well as longer-term opportunities to partner with the largest US independent broker-dealer.
What will this do for Macquarie?
The global investment bank expects Macquarie Asset Management’s (MAM) assets under management (AUM) to increase to over US$465 billion, or AU$650 billion, with the combined business becoming a top 25 actively managed, long term, open-ended US mutual fund manager by AUM.
Head of Macquarie Asset Management, Martin Stanley, said: “The addition of Waddell & Reed and our enhanced partnership with LPL will significantly increase our ability to grow and invest in our combined business for the benefit of our clients. Ivy Investments’ complementary investment capabilities will provide diversification to Macquarie Asset Management’s capabilities and client base. The consideration offered reflects the quality of Waddell & Reed’s business and the future benefits of our partnership with LPL.”
Summary thoughts
The US is a huge market and I think there’s plenty of room for Macquarie to expand and grow in the US, particularly in this period of COVID-19 disruption.
Macquarie is a great business, though it will soon face more competition in one of its key markets (Australia) from Barrenjoey which is backed by Magellan Financial Group Ltd (ASX: MFG). Out of Macquarie and Magellan, I think I’d prefer to invest in Magellan because of the growing FUM and it still seems to have more ideas for growth (such as Barrenjoey and a retirement product).
