City National Corp., the bank holding company that owns Convergent Capital Management LLC, has agreed to buy a majority interest in Lee Munder
Capital Group, a firm with more than $3 billion in assets under management.
The deal, which is expected to close in the third quarter, advances Convergent's aggressive strategy of accumulating asset management firms for both wealthy investors and institutions, and combining their operations when appropriate.
Convergent and City National of Beverly Hills, Calif., plan to merge Lee Munder with their majority holding in Independence Investments LLC, an institutional asset management firm that they bought in May 2006 from John Hancock Financial Services Inc. Both Munder and Independence Investments are based in Boston and together have more than $4 billion in assets under management.
They will operate under the Munder name.
“Convergent is one of the primary acquirers in the multibillion-dollar registered investment advisory arena, buying one or more firms with $5 billion to $10 billion of assets every year,” said Dave DeVoe, managing director of strategic business development at Schwab Advisor Services, a unit of The
Charles Schwab Corp.
Convergent, which is based in Chicago, and Munder keep some of their assets in custody with San Francisco-based Schwab.
The planned acquisition could signal a more active year in advisory firm acquisitions, driven by a rising stock market that may be raising target firm valuations, Mr. DeVoe said.
Based on Schwab's preliminary data of about 40 mergers and acquisition deals completed through this month, full-year results could equal the record 82 transactions with an asset under management value of $134 billion tracked by Schwab last year, he said.
Lee Munder, which was founded in 2000, offers an array of mostly equity products, ranging from small-cap-growth and small-cap-value strategies to large-cap core and international equities.
Kenneth Swan, president of Lee Munder Capital, will be chief executive of the combined group, while Lee Munder's Jeffrey Davis will remain chief investment officer.
MINORITY INTEREST
Founder Lee Munder “will have a significant and broadly held minority interest in the business,” according to a statement City National issued last week.
Berkshire Capital Securities LLC, a New York-based investment bank, advised both City National and Lee Munder on the merger.
As of March 31, Convergent operated eight advisory firm affiliates with about $18 billion in assets under management.
Convergent also has two units that provide support services to financial advisers, according to its website.
RAPID EXPANSION
The firm expanded rapidly in 2007.
In May that year, it bought Rockville, Md.-based Lydian Wealth Management, which then had $7 billion in assets under management. Lydian has been renamed Convergent Wealth Advisors.
Six months later, Convergent arranged the merger of two advisory firms — Clifford Associates and Philip V. Swan Associates LLC — to form Pasadena, Calif.-based Clifford Swan Investment Council, another large affiliate.
Convergent, founded by investment bankers Richard Adler and H. Tom Griffith in 1994, sold a majority interest to publicly traded City National in April 2003. It operated eight advisory firm affiliates with about $18 billion in assets under management as of March 31 and also has two units that provide support services to advisers, according to its website.
E-mail Jed Horowitz at [email protected].
