State Street to acquire BBH’s Investor Services for $3.5 billion

Rick Steves

As of June 30, 2021, BBH Investor Services had $5.4 trillion in Assets Under Custody (AUC), adding to State Street’s $31.9 trillion in AUC.

State Street has agreed to acquire Brown Brothers Harriman’s Investor Services business, including its custody, accounting, fund administration, global markets and technology services, for $3.5 billion in cash.

The deal will make State Street the World’s number one provider of asset servicing as it brings together two premier businesses with significant scale.

The acquisition worth $3.5 billion is expected to deliver earnings accretion in year 13 as State Street increases its pre-tax margin medium-term financial target.

As a result of the anticipated earnings growth from this transaction, State Street is now targeting an increased pre-tax margin of 31%.

The acquisition is expected to advance State Street’s strategy as an enterprise outsource solutions provider by creating the number one asset servicer globally, 1 strengthening competitive positioning, expanding geographic coverage and enhancing client experience.

Ron O’Hanley, Chairman and Chief Executive Officer of State Street Corporation, said. “The Investment Servicing industry enjoys strong fundamentals as worldwide growth in financial assets drives industry revenues. This combination with BBH Investor Services helps us consolidate our position as the industry innovator and leader.

“We are enhancing our leadership position across a range of services, augmenting our position in a number of key markets, growing relationships with many of the leading global asset managers and owners, and increasing our capabilities and scale. Additionally, BBH Investor Services brings us strong talent, including industry leading service excellence and quality execution.”

Bill Tyree, managing partner of BBH, commented: “We made this decision after careful consideration of the current and future landscape of the global securities servicing industry, including how best to support and innovate for the growing breadth and complexity of our clients’ servicing requirements. State Street is the ideal partner – a firm that shares our core values of unmatched client service, integrity, trust, and a long-term commitment to sustainability.”

BBH Investor Services is a global asset servicer with a track record of exceptional client service and deep expertise in cross-border, alternatives, ETFs, and other high-growth asset classes.

As of June 30, 2021, BBH Investor Services had $5.4 trillion in Assets Under Custody (AUC), adding to State Street’s $31.9 trillion in AUC.

The parties are targeting year-end 2021 to complete the acquisition, subject to regulatory approvals and customary closing conditions.

BBH Investor Services employees will move to State Street and the senior management team will transition to State Street in executive leadership roles. Seán Páircéir, currently partner and Global Head of Investor Services at BBH, will join State Street’s Management Committee.

State Street estimates synergies of $260 million in year 3 as a result of efficiencies in operational systems and infrastructure, as well as overhead consolidation.

The transaction should be primarily financed through the issuance of common equity, the suspension of common share repurchases before resuming during 2Q22, and cash on hand.

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