Ann: Funds Under Management and Performance Fee Update - Dec 2022, page-37

@MAB73

This is nice in theory, but your comment suggest you don't understand this business or industry.

If Magellan was a copper miner experiencing significant cash burn but possessed a tier 1 asset, then obviously BHP would come knocking. That's because copper is a finite resource and BHP would have the expertise to acquire it and turn a loss-making mine into a money machine.

The same cannot be applied to Magellan. Once you buy Magellan, what happens? You're buying a business that cannot conceivably be turned around because all those investor monies are legally tied to MFG funds. Their funds under management cannot be simply transferred into the acquirer's funds due to all sorts of regulations, tax consequences, adviser group policies etc. And even if the acquirer wanted to keep Magellan as a stand-alone entity, there is no logic in doing so.

They would be buying a business that is experiencing significant cash outflow which would only deepen if the investment staff then also left or were sacked following the acquisition. Buying a business with diminishing profitability, but with the expertise and mechanisms to turn around that profitability is one thing, but to a buy a business that is in perpetual decline is financial suicide for any acquirer.