Franklin Templeton to buy Lexington Partners for $1.75bn

Franklin Templeton has agreed to acquire Lexington Partners L.P., a global manager of secondary private equity and co-investment funds.

Franklin Templeton has agreed to acquire Lexington Partners L.P., a global manager of secondary private equity and co-investment funds. The purchase price is $1.75 billion.

PRESS RELEASE

SAN MATEO, Calif.–(BUSINESS WIRE)–Franklin Resources, Inc. [NYSE:BEN], a global investment management organization operating as Franklin Templeton, today announced that it has entered into a definitive agreement to acquire Lexington Partners L.P. (“Lexington”), a leading global manager of secondary private equity and co-investment funds. This acquisition will bolster Franklin Templeton’s alternative asset capabilities, complementing its existing strengths in real estate, private credit, and hedge fund strategies, at a time when investors are increasingly allocating capital across the full spectrum of alternative asset offerings.

“This acquisition will position us to capitalize on the highly sought after secondary private equity market, an area of growth that complements Franklin Templeton’s existing alternative asset capabilities to meet the growing appetite of our clients for alternative asset management around the globe.”

“We could not be more excited to welcome Lexington and its world-class team,” said Jenny Johnson, President and CEO of Franklin Templeton. “This acquisition will position us to capitalize on the highly sought after secondary private equity market, an area of growth that complements Franklin Templeton’s existing alternative asset capabilities to meet the growing appetite of our clients for alternative asset management around the globe.”

Since its founding in 1994, Lexington has established itself as one of the world’s largest and most successful independent managers of secondary private equity and co-investment funds. Lexington has raised in excess of $55 billion in aggregate commitments from more than 1,000 institutional investors, deploying capital across more than 4,500 secondary, co-investment and primary interests. Lexington is currently investing from its $14 billion flagship global secondary fund, its $2.7 billion middle market secondary fund and its $3.2 billion co-investment vehicle.

A global firm with current fee-based AUM of $34 billion, Lexington has eight offices strategically located in major centers for private equity and alternative investing including New York, Boston, Menlo Park, London, Hong Kong, Santiago, São Paulo and Luxembourg. Lexington’s 35 partners and principals average 17 years of alternative investment experience and more than 14 years together at Lexington.

Wil Warren, President of Lexington, added, “The strategic and cultural fit between Franklin Templeton and Lexington is ideal. My colleagues and I are delighted to continue to pursue our investment strategies while benefiting from the resources and support of one of the industry’s largest and most diverse investment management organizations. This transaction provides for long-term continuity and stability for our investors, management team and employees. Furthermore, the transaction has been structured to provide significant ongoing ownership of Lexington by our team, providing continued strong alignment with our limited partners. We are very excited to partner with Franklin Templeton to grow and innovate in our market segments, as we have over the past 27 years.”

Tom Gahan, Head of Alternatives at Franklin Templeton, commented, “Lexington is a powerful and complementary addition to our alternative asset capabilities. Adding Lexington’s leading private equity expertise alongside the real estate strength of Clarion Partners, the private credit capabilities of Benefit Street Partners and the hedge fund offerings of K2 Advisors provides Franklin Templeton with a substantial and diverse alternative asset platform.”

Franklin Templeton has demonstrated a commitment to expanding its alternative asset management business, through a combination of both acquisitions and organic growth. With the addition of Lexington, Franklin Templeton’s alternative assets under management are expected to be approximately $200 billion at the time of transaction close.

Transaction Terms and Financial Impact
Franklin Templeton is acquiring 100% of Lexington from its current owners, for aggregate cash payments of $1.75 billion, made up of $1 billion at close and additional payments totaling $750 million over the next three years. Lexington will operate as a Specialist Investment Manager within Franklin Templeton with its current management team continuing in their roles post transaction. As part of the transaction, Lexington partners and employees will simultaneously be granted a 25% ownership stake in Lexington vesting over five years and $338 million of performance-based cash retention awards to be paid out over approximately five years.

The transaction will be funded from Franklin Templeton’s existing balance sheet resources and is expected to be immediately accretive to adjusted earnings per share.

The transaction is subject to customary closing conditions and is expected to close by the end of the second fiscal quarter of 2022.

Broadhaven Capital Partners, LLC, BofA Securities, and Citi served as financial advisors to Franklin Templeton, and Willkie Farr & Gallagher LLP acted as legal counsel. Goldman Sachs & Co. LLC served as exclusive financial advisor to Lexington Partners, and Morgan Stanley & Co. LLC served as financial advisor to the Trust representing Lexington’s founder and majority shareholder. Simpson Thacher & Bartlett LLP served as legal counsel to Lexington. Weil, Gotshal & Manges LLP served as legal counsel to Lexington’s majority shareholder.

Conference Call Information
Executives from Franklin Templeton and Lexington will lead a live teleconference today at 11:00 a.m. Eastern Time to discuss the transaction, along with Franklin Templeton’s results for the quarter and fiscal year ending September 30, 2021. Access to the teleconference will be available by dialing (833) 350-1245 in the U.S. and Canada or (236) 712-2205 internationally, and a supplementary presentation will be available to investors via franklinresources.com. A replay of the teleconference can also be accessed by calling (800) 585-8367 in the U.S. and Canada or (416) 621-4642 internationally, using access code 1859388, after 2:00 p.m. ET on November 1, 2021, through November 8, 2021.

Franklin Templeton has agreed to acquire Lexington Partners L.P., a global manager of secondary private equity and co-investment funds.About Franklin Templeton
Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 165 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the Company brings extensive capabilities in equity, fixed income, multi-asset solutions and alternatives. With offices in more than 30 countries and approximately 1,300 investment professionals, the California-based company has over 70 years of investment experience and over $1.5 trillion in assets under management as of September 30, 2021. For more information, please visit franklinresources.com.