It was recently announced that Softbank would acquire Fortress – the large alternatives manager – for $3.3bn. The acquisition of the $70bn AUM behemoth is certainly interesting from a number of angles. Do the management of Softbank feel Fortress is simply an undervalued asset and with some patience it can extract a higher value, or is there something else going on?
Certainly Fortress IPO’d right at the top of the market (along with Blackstone – $4bn IPO) in 2007 just before the financial crisis. Hard to believe but the share price collapsed from $18.50 to a low of 77c (having peaked at almost $30) and Fortress management can’t have enjoyed the public glare and demands for quarterly earnings updates etc. So perhaps becoming private once again will suit Fortress better. Softbank had been keen to invest more into the US and tapping into the Fortress knowledge, experience and above all its vast extensive network makes a lot of sense.
It does ask the wider question of whether more tech companies will either acquire financial companies such as banks, insurance companies and asset mangers (or build from scratch and avoid legacy issues). With their huge customer bases, social media savviness, and obvious technological know-how they are a real threat to the incumbent financial services companies that are struggling to deal with the constant change and evolution of both technology and regulation. Solving the technological issues and complexities ought to be, one assumes, relatively straightforward for the likes of Apple, Facebook, Alphabet etc. to get to grips with but they may struggle on the regulatory side.
Certainly the acquisition of Fortress by Softbank shows the direction the financial world is headed and that FinTech and RegTech is definitely the space to watch.