Smith Graham & Co. Investment Advisors L.P. (No. 8 on the B.E. Asset Managers list with $2.753 billion in assets under management) acquired the fixed-income and small- and midcap value equity assets of a New York City-based firm in a deal that’s expected to increase assets to nearly $6 billion. Specific terms of the deal, which was completed Friday, were not disclosed.
According to Gerald B. Smith, chairman and CEO, the acquisition of Ark Asset Management Co. Inc. will add $2.8 billion in assets to his Houston-based firm’s portfolio. “It’s a very transformational event for our firm, when you can double your assets in this kind of market and gets to a level that puts you on a different playing field,†he said from his recently opened office in New York City’s financial district.
Ark Asset Management is a majority-owned firm that was once Lehman Brothers’ asset management business until taken private via a leveraged buyout offer in 1988.
“They had some challenges, and with the market volatility over the past couple of years it was difficult for them to manage their cost structure,†Smith recalls. “We were approached by a banker who asked if we had an interest in acquiring the fixed income assets of the firm back in October. We had some discussion with the principles and they mentioned they had a very good small and midcap value asset team and asked if we had an interest in acquiring those assets as well.â€
According to Smith, the deal will not only double the company’s assets, but also nearly triple revenues — a good thing given the abysmal condition of the financial markets. “I don’t see any major upside to the market
any time soon,†Smith says. “So I think firms are just going to have to be able to operate at a different level and focus on their cost structures and managing their business in a very difficult environment for the next year or so at least.â€However, he remains upbeat about the long-term viability of the firm. “The market will come back, and we think we’ll be well positioned for that.â€