Five years after hanging a "for sale" sign on TCW Group, founder and chairman Robert Day has finally found a buyer - and a price - he likes.
By Andrew Capon
May 2001
Institutional Investor Magazine
Five years after hanging a "for sale" sign on TCW Group, founder and chairman Robert Day has finally found a buyer - and a price - he likes.
France's Société Générale has agreed to pay $880 million for a majority stake in the Los Angeles-based money manager and to acquire nearly 20 percent more over the next five years. The long wait for the right partner was worth it, says Day, 57, who will become the first American to sit on SocGen's board once the deal receives final approval. "We spoke to about 20 firms back in 1996, but, ironically, SocGen wasn't one of them," he says. "The beauty of the transaction is that it is a perfect fit. The U.S. is a new market for SocGen. They've built a very good business in Europe and Japan, and those clients want U.S. money management expertise. Our U.S. clients want European and Asian products. It's a great combination."
Not surprisingly, Philippe Collas, CEO of SG Asset Management, agrees that TCW gives his firm a much-needed U.S. presence. "We are absolutely committed to asset management as a core business for the group. The U.S. was a hole that needed to be filled," says Collas. The acquisition of TCW is the latest, boldest step in SocGen's bid to become a global force in asset management. In 1997 the French giant established SG Asset Management UK, which now oversees $9 billion. It acquired Japan's Yamaichi Capital Management in 1998. The addition of TCW will push SG Asset Management's $150 billion under management to $230 billion.
After rejecting all suitors in 1996, Day focused on boosting profitability and performance to secure a better deal for the firm. Last year TCW set records for revenues, profits and asset growth. Once heavily dependent on the institutional market, the firm has diversified its client base: 30 percent of assets are now managed for individuals, up from 20 percent in 1997. Assets in managed accounts doubled in 2000, to $6.3 billion. Core U.S. equities, under Glen Bickerstaff, and U.S. fixed income, managed by Jeffrey Gundlach, have become increasingly important drivers of the firm's asset growth.
SocGen will give TCW's up-and-coming fund managers stability and long-term incentives - a key selling point for Day, who will remain chairman and CEO of TCW Group post-acquisition. In 1997 TCW bought back 20 percent of its stock to distribute to its managers; the SocGen deal will keep a substantial portion of those shares in key employees' hands.
Day appreciates the importance of keeping young talent motivated: Heir to an oil fortune, he founded TCW at the tender age of 26.
