An earlier blog on Blogdaleupsome,also on Blogger, (September22,2017) discussed 3 up and coming financial companies.The three were AGF Finance,Fiera Capital and Guardian Capital.Of the three Blogdaleupsome picked Fiera Capital as the best investment.The reasons are discussed in the September blog.Now Fiera has sweetened the pot by buying an asset management company called Natcan which was an arm of National Bank.Fiera had $125 billion assets under management and now it has $139 billion-a 9% jump.
The Natcan Deal
This is a deal taking 7 years to complete.The deal calls for 7 annual payments of about $8.5 million each year for a total of about $60 million.Fiera gives no indication as to whether it will be accretive to it's earnings (either immediately or after several years).A rule of thumb is that a good deal requires payment of less than 5 times EBITDA but investors have not been informed of the multiple paid.But business in Quebec is not strong relative to the past and this blog expects that it may have paid only 2 to 3 times EBITDA.For example, an investor buying Fiera shares pays 95 to 100 times EBITDA.If the multiple is this low then look for Natcan to be accretive to Fiera earnings in one to two years.This blog takes this as an excellent deal as there is a real paucity of players available to acquire in the $25 to $100 million category.
Fiera's Share Price
First it should be mentioned that Natcan was an exceptional find for Fiera.They only found out because their Chairman is or was on the National Bank board of directors.He had information that few others had.Secondly now Fiera has $130 billion in Assets under Management compared to $35 billion for AGF and $24 billion for Guardian Capital.Assets under management is the revenue base that each financial company charges fees and can earn revenues on.So Fiera should ideally earn 20% more revenue in 2018.And this is the building block needed to send Fiera Capital to $18 by year end. https://www.brookfield.com/
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