Notes on the Pantheon Ventures Acquisition

Top news story this morning is that Affiliated Managers Group (NYSE: AMG) has agreed to buy fund-of-funds and secondary fund manager Pantheon Ventures for around $775 million in cash from Russell Investments (a subsidiary of Northwestern Mutual Life). For the uninitiated, Pantheon currently has around $22 billion in assets under management, including a particularly high level of dry powder. AGM has done five acquisitions in the past seven months, but this is the largest.

I talked to a bunch of folks this morning about the deal, including AMG CEO Sean Healey and Pantheon managing director Susan McAndrews. A few notes:

* Northwestern Mutual received some unsolicited interest in Pantheon in the early fall of last year, and officially put it on the block on October 1. Credit Suisse ran the process.

* All of the $775 million goes to Northwestern Mutual, which will continue to be responsible for unfunded commitments to vehicles that have already closed. Any commitments to vehicles still being raised will be assumed by AMG.

* McAndrews says that Pantheon views this as the partnership “buying the business back.” Russell had originally purchased Pantheon in 2003, a deal McAndrews believes made a good deal of sense at the time. Since the financial crisis, however, most of the original folks on Russell’s side are gone, and McAndrews says some Pantheon clients were worried about stability at the top.

* McAndrew also says that Pantheon might do some “selective recruiting,” but that hiring has not been stymied under Northwestern Mutual’s stewardship.

* AMG had been talking for a while about expanding into private equity, and looked at a bunch of different options. It ultimately settled on the idea of a fund-of-funds manager, because it would have a longer-term and stronger recurring revenue flow than would a single manager. AMG also wanted the diversified risk-managed approach that comes from a fund-of-funds.

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