Perpetual’s empire-building purchase of Pendal backfires

The pitfalls of expansion by acquisition were summed up succinctly this week by Jefferies president Brian Friedman who told Chanticleer: “In good deals, value is made on the deal and in bad deals value is lost on the deal.”

The measure of the “badness” of the Barrow Hanley deal is that it cost Perpetual $465 million, which is more than the $400 million that Phil King’s Regal Partners is offering for all of Perpetual Investments.This $400 million figure is arrived at by stripping out the estimated $1.3 billion value that some have placed on Perpetual’s trust business, which is being bought by Baring Private Equity Asia through its BPEA Private Equity Fund VIII.

The fact that about 17 per cent of Perpetual’s register is owned by index funds means there has not been an activist shareholder holding the board and Adams to account. Normally, Perpetual would fill this role, but its fundies’ lips are sealed.at the top of the fundie pile. He strode past Perpetual on the back of an aggressive approach to investing, using leverage to earn highly volatile returns while pulling in above market fees.

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