Based in New York, NY, Silvercrest Asset Management Group (SAMG) scheduled a $55 million IPO with a market capitalization of $134 million at a price range mid-point of $12 for Wednesday, November 14, 2012.
Three other IPOs are scheduled for this week. The full IPO calendar is available here.
S-1 filed October 29, 2012.
Manager, Joint Managers: Sandler O'Neill; Raymond James.
SAMG is a money management firm. Its target market is individuals with a net worth in excess of $30 million, although SAMG is expanding into institutional management, which currently accounts for 6% of assets.
SAMG's IPO is being driven by a third party investor who wants to cash out to the tune of $38 million, which raises the question of what do they know that we don't? Or perhaps the cash out is just for estate planning purposes.
SAMG intends to pay a 4% annual rate of dividends, but that doesn't start until the June 2013 quarter.
|annualizing June '12 6 mos|
|Silvercrest Asset Management Group (SAMG)|
|Eaton Vance (EV)|
|T. Rowe Price (TROW)|
|Gamco Investors (GBL)|
SAMG appears to be on a decent growth trajectory and is priced at a premium to the industry leaders, which can be a problem.
Another concern is that SAMG's IPO appears too small to get much interest from institutional investors, so there may be limited demand for the stock, beyond what SAMG itself and the underwriters can generate.
Because of the growth plan, however, IPOdesktop is neutral to slightly positive for SAMG, but believes the stock should be priced a little lower than the mid-range of $12.
As of June 30, 2012, SAMG's assets under management were $10.7 billion, which SAMG believes makes it the largest investment adviser in the United States that is focused on high net worth clients.
Immediately following the reorganization, SAMG's only material asset will be the general partnership interests in Silvercrest L.P
SAMG is principally owned by its employees. As a result, net income, after amounts attributable to non-controlling interests, will represent 39.9% of Silvercrest L.P.'s net income
ASSETS UNDER MANAGEMENT
During the six months ended June 30, 2012, assets under management grew 5.9%, from $10.1 billion to $10.7 billion. During the twelve months ended December 31, 2011, assets under management grew 9.8%, from $9.2 billion to $10.1 billion.
As of June 30, 2012, approximately 94% of assets under management were held for individual clients and 6% for institutional clients. Based on the strong investment results of SAMG's proprietary equity strategies, SAMG has begun to attract a significant amount of institutional investor interest
As of September 30, 2012, assets under management were approximately $11.2 billion. While SAMG has not yet finalized results for the third quarter, SAMG expects that revenue for the third quarter of 2012 will be approximately $12.8 million.
Revenue for the six months ended June 2012 was about $25 million, so the September quarter is about the same as the average for the two quarters ended June 2012.
SAMG intends to pay quarterly cash dividends and expects that the first dividend will be paid in the second quarter of June 2013 and will be $0.12 per share of Class A common stock.
Only holders of our Class A common stock will be entitled to any dividend declared by SAMG.
Note: SAMG shareholders will have to wait over six months for a dividend. Most dividend paying IPOs pay sooner. The $.12 per quarter annualized is 4% at the price range mid-point of $12.
Silvercrest L.P.'s Historical Distributions
Prior to the completion of this offering, Silvercrest L.P. was owned by 37 of its current employees and one outside investor, who will be cashed out in the proposed IPO.
Silvercrest L.P. made distributions to its partners of $10.0 million, $5.9 million, $7.4 million, $12.9 million and $9.6 million for the years ended December 31, 2011, 2010, 2009, 2008 and 2007, respectively, and $12.1 million and $7.8 million for the six months ended June 30, 2012 and 2011, respectively.
Prior to the consummation of this offering, Silvercrest L.P. intends to make a distribution to its existing partners in the aggregate amount of $10.0 million representing its undistributed earnings generated prior to the date of this offering.
Continuing the short-term growth strategy, SAMG intends to establish offices in major wealth centers on the West Coast, in the Southwest and in the Midwest in order to be closer to both clients and to prospective clients.
After four years of effort focused on cultivating relationships with institutional investment consultants, SAMG is now regularly making new business presentations to institutional investors, including public and corporate pension funds, endowments, foundations, and their consultants.
SAMG is now on the "approved" lists of certain prominent institutional investment consultants and has begun to win mandates in with its equity strategies. This trend was recently highlighted by SAMG's selection by a very large state retirement fund to manage an equity mandate of up to $400 million.
In addition, SAMG has been hired to manage a new equity mutual fund which is presently in the early stages of its national marketing campaign.
SAMG expects this trend to continue once it is publicly known that these and other institutions have engaged SAMG to manage significant portfolios for them.
The importance of institutional growth to SAMG is noteworthy: Institutional assets will likely expand not only assets under management but also profit margins; and the painstaking due diligence conducted by these institutions before selecting SAMG will ratify and confirm the decisions to hire SAMG made by individual clients.
As of June 30, 2012, SAMG had 87 employees, including 37 employee-owners. The 37 employee-owners of Silvercrest L.P. are also referred to as principals.
STRUCTURE & REORGANIZATION
On July 11, 2011, Silvercrest was incorporated as a Delaware corporation. Silvercrest GP LLC is currently the general partner of Silvercrest L.P., which is the managing member of the operating subsidiary, Silvercrest Asset Management Group LLC.
Prior to the consummation of this offering, the members of Silvercrest GP LLC will receive a distribution of the general partner interests of Silvercrest L.P. owned by Silvercrest GP LLC as part of the reorganization.
Once acquired, these interests that were distributed to the members of Silvercrest GP LLC will be automatically converted into limited partnership interests. Subsequent to the distribution of the general partner interests of Silvercrest L.P. to its members and the conversion of those interests into limited partnership interests, Silvercrest GP LLC will transfer its rights as general partner to Silvercrest and will be dissolved.
Thereafter, Silvercrest will become the general partner of Silvercrest L.P. As part of the reorganization, the partnership agreement of Silvercrest L.P. will be amended to provide that the limited partnership interests will be converted to Class B units and the general partnership interests will be converted to Class A units.
Immediately following the reorganization, SAMG's only material asset will be the general partnership interests in Silvercrest L.P. SAMG will use $38.1 million of the net proceeds from this offering to purchase Class B units of Silvercrest L.P. from its current limited partners, including all Class B units held by a third-party investor in Silvercrest L.P., and such Class B units acquired by SAMG will be immediately converted into Class A units.
Following the reorganization and this offering, SAMG will own all of the Class A units, which represent the general partnership interest in Silvercrest L.P., or 41.0% of the partnership units of Silvercrest L.P. The remaining approximately 59.0% of the partnership units in Silvercrest L.P will be held by 37 of SAMG's principals. In addition, Silvercrest L.P. has issued deferred equity units exercisable for 322,910 Class B units which entitle the holders thereof to receive distributions from Silvercrest L.P. to the same extent as if the underlying Class B units were outstanding.
USE OF PROCEEDS
SAMG expects to net $50 million from its IPO.
SAMG will use $38.1 million to purchase Class B units of Silvercrest L.P. from its current limited partners, including all Class B units held by a third-party investor in Silvercrest L.P., and such Class B units acquired will be immediately converted into Class A units.
Prior to the consummation of this offering, Silvercrest L.P. intends to make a distribution to its principals of previously undistributed earnings in the aggregate amount of approximately $10.0 million, to be funded from existing cash balances.
Disclaimer: This SAMG IPO report is based on a reading and analysis of SAMG's S-1 filing which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.