Franklin Templeton to buy Lexington Partners for $1.75bn as part of secondaries push

Franklin Templeton agreed on Monday to buy investment firm Lexington Partners, which is known for acquiring secondary stakes in private equity funds, for $1.75bn in cash.

Several investment firms have purchased secondaries businesses in recent months to tap into the growing market for second-hand private equity assets, which has hit record levels in the past few months.

Ares Management’s $1.01bn deal for Landmark Partners and Raymond James Financial’s acquisition of Cebile Capital were similar such purchases. Last week, T Rowe Price said it would buy fund manager Oak Hill Advisors in a $4.2bn deal, to ramp up its alternative investments offering.

Secondary firms can either buy stakes in private equity funds from investors seeking an exit or can co-invest alongside others.

The market has become a more mature asset class and an important source of liquidity for private equity funds, with established players like BlackRock also expanding into the business.

Franklin Templeton said it will pay $1bn after the deal closes by the end of the second fiscal quarter of 2022. The additional $750m will be paid over the next three years, it said.

Founded in 1994, Lexington currently manages $34 billion of assets. It has raised over an aggregate $55bn from over 1,000 institutional investors.

With the addition of Lexington, Franklin Templeton said its alternative assets under management could be nearly $200bn when the deal closes.

Broadhaven Capital Partners, BofA Securities and Citi were the financial advisers to Franklin Templeton, while Goldman Sachs & Co advised Lexington on the deal.

Source: Reuters