Asset manager Victory Capital has signed its second deal in two months with its announcement late Tuesday that it will acquire USAA Asset Management Company for $850 million.
The deal will be financed through a combination of debt and cash on hand, according to Victory’s announcement.
“We’re pretty excited about the acquisition,” Victory chief executive officer David Brown said by phone Wednesday. “We are humbled and honored that USAA has chosen us to serve their partners and provide them with investment products.”
San Antonio-based multistrategy firm USAA invests on behalf of current and former military members and their families and managed $69.2 billion through the end of September. Victory has taken advantage of an influx of smaller asset management shops looking to sell themselves recent years. The firm most recently acquired Harvest Volatility Management in September, paying $300 million for the firm, according to an announcement at the time.
USAA held an auction process, and the competition was strong, Brown said. The fir's mutual funds have strong performance numbers, with an average ten-year organic growth rate of 3.4 percent, as compared with a 1.1 percent growth rate for their active manager peers, according to Victory’s announcement.
According to Brown, Victory was selected because of the strong cultural fit between the two firms.
“Culturally, both organizations have a lot of the same values,” Brown said. “They think of their members in a similar way to how we think of our clients.”
Victory paid roughly 6.9 times ebitda (earnings before taxes, interest, depreciation, and amortization) for USAA, Brown said.The deal brings Victory’s assets under managementto $144.4 billion, the announcement said.
As a result of the deal, Victory Capital will rank among the top 50 money managers in the United States based on assets under management, according to Brown. It will also become one of the top 25 mutual fund providers in the United States, he said.
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The deal is expected to close in the next six or seven months, according to Brown. He added that following the deal’s close, the firm will take roughly a year to integrate USAA into its offerings before looking at another deal.
“We’ll have to digest these businesses first,” Brown said. “Longer term, we’ll continue to execute on our business model and look at deals as they come up.”
All proceeds from the deal will be used to benefit members, according to a separate announcement from USAA.
“We believe Victory Capital is well positioned to provide a broader selection of leading-edge investment solutions to our members over the long term while maintaining the high standards of service that our members expect,” said Stuart Parker, chief executive officer of USAA, in the announcement. “We are committed to working with employees and members to ensure a smooth transition.”