Franklin Resources Gobbles up Lexington Partners
Posted on 11/01/2021
Franklin Resources, Inc. (NYSE:BEN), a global investment management organization operating as Franklin Templeton, announced that it has entered into a definitive agreement to acquire Lexington Partners L.P., a global manager of secondary private equity and co-investment funds. This acquisition will bolster Franklin Templeton’s alternative asset capabilities, complementing its existing strengths in real estate, private credit, and hedge fund strategies, at a time when investors are increasingly allocating capital across the full spectrum of alternative asset offerings. Lexington Partners was founded in 1994 by Brent R. Nicklas (age 73). In June 2018, Wilson S. “Wil” Warren was named President of Lexington Partners.
Lexington has raised in excess of $55 billion in aggregate commitments from more than 1,000 institutional investors, deploying capital across more than 4,500 secondary, co-investment and primary interests.
A global firm with current fee-based assets under management of US$ 34 billion, Lexington has eight offices strategically located in major centers for private equity and alternative investing including New York, Boston, Menlo Park, London, Hong Kong, Santiago, São Paulo and Luxembourg.
Deal Terms
Franklin Templeton is acquiring 100% of Lexington from its current owners, for aggregate cash payments of US$ 1.75 billion, made up of US$ 1 billion at close and additional payments totaling $750 million over the next three years. Lexington will operate as a Specialist Investment Manager within Franklin Templeton with its current management team continuing in their roles post transaction. As part of the transaction, Lexington partners and employees will simultaneously be granted a 25% ownership stake in Lexington vesting over five years and $338 million of performance-based cash retention awards to be paid out over approximately five years.
The transaction will be funded from Franklin Templeton’s existing balance sheet resources and is expected to be immediately accretive to adjusted earnings per share.
The transaction is subject to customary closing conditions and is expected to close by the end of the second fiscal quarter of 2022.
Advisors
Broadhaven Capital Partners, LLC, BofA Securities, and Citi served as financial advisors to Franklin Templeton, and Willkie Farr & Gallagher LLP acted as legal counsel. Goldman Sachs & Co. LLC served as exclusive financial advisor to Lexington Partners, and Morgan Stanley & Co. LLC served as financial advisor to the Trust representing Lexington’s founder and majority shareholder. Simpson Thacher & Bartlett LLP served as legal counsel to Lexington. Weil, Gotshal & Manges LLP served as legal counsel to Lexington’s majority shareholder.
