The competitive landscape for Perpetual Limited’s wealth management unit, valued at $21.5 billion, has shifted as Bain Capital has withdrawn from the bidding process. This development leaves Perpetual in negotiations primarily with AZ Next Generation Advisory (AZ NGA), a financial planning group backed by Oaktree Capital Management, which currently oversees over $15 billion in assets.
Negotiations have been ongoing for nearly two months, with Bain Capital’s exit marking a significant moment in the bidding war for the wealth management unit. The firm had previously engaged with the Barrenjoey-led process, but its decision to withdraw raises questions about the future of the bidding landscape.
While AZ NGA continues to pursue the acquisition, it has been noted that TA Associates, an active acquirer of financial services firms in Australia and New Zealand, is no longer part of the negotiations as of last Sunday. No other bidders have publicly emerged, leaving AZ NGA as the primary entity contending for the unit.
Key Concerns and Valuation Expectations
Discussions surrounding the sale are complicated by various factors, including the future of the Perpetual brand, which has been established for 138 years. Both Perpetual and AZ NGA are reportedly discussing whether the brand will be included in the sale, as it holds significant value among advisers and retail investors. The potential sale price is another pressing matter; analysts suggest that the wealth management unit could generate around $70 million in EBITDA for the financial year 2025. However, complications in the market may force this figure to be adjusted.
Recent quarterly results revealed a modest 2 percent increase in funds under advice, driven by strong equity markets, while net flows remained flat. Current estimates place the valuation of the wealth unit between $550 million and $700 million, based on an EBITDA multiple of eight to ten times. This aligns closely with a valuation of $740 million assigned by analysts at UBS shortly after the quarterly update.
Market Reactions and Future Implications
Perpetual’s board faces scrutiny from shareholders, particularly in light of past decisions regarding the brand. The recent market response to potential sales strategies has been cautious, especially following a previous attempt to sell the brand to KKR as part of a larger $2.2 billion wealth management and corporate trust deal. Stakeholders are keenly observing how far apart the buyers’ expectations and the board’s pricing strategy may be.
The tax implications of this deal are also under consideration, with expectations that they will be significantly lower than the $493 million and $529 million rulings from the Australian Taxation Office related to KKR’s previous transactions.
Should a sale of the wealth division not materialize or if Perpetual cannot secure a satisfactory price, there are concerns that the company may need to pursue a rights issue to manage its current gross debt, estimated between $740 million and $750 million. As negotiations continue, the next steps for Perpetual and its brand remain uncertain, leaving stakeholders to await further developments in this high-stakes auction.
