8-K: Federated Hermes to Acquire Majority Stake in FCP Fund Manager

Federated Hermes will acquire 80% of FCP Fund Manager, a U.S. real estate investment manager with $3.8 billion in assets.

Summary

• Federated Hermes (FHI) will acquire an 80% interest in FCP Fund Manager, L.P. (FCP), a U.S. based real estate investment manager.
• FCP manages $3.8 billion in assets as of June 30, 2025, and has over 75 employees.
• The aggregate purchase price is up to $331 million, including $215.8 million in cash, $23.2 million in FHI Class B common stock, and up to $92 million in contingent consideration.
• The transaction is expected to close in the first half of 2026, pending regulatory approvals and third-party consents.
• FHI expects to fund the cash portion of the acquisition with cash from its balance sheet and its revolving line of credit.

Sentiment

Score: 8

Explanation: The filing is generally positive, highlighting the strategic benefits of the acquisition and the expected financial accretion. While there are risks and uncertainties associated with forward-looking statements, the overall tone is optimistic.

Positives

• The acquisition expands Federated Hermes' private markets/alternatives investment capabilities, particularly in the U.S.
• It introduces additional expertise as Federated Hermes seeks to develop product solutions for its clients at a time of increasing demand for the private markets asset class.
• FCP has a long-term record of real estate investment performance, which has been driven by a focus on risk-adjusted returns, extensive local and regional market knowledge and deep community relationships.
• FCPs culture and principles align well with FHI.
• The transaction is expected to be accretive to EPS, with FY2026E accretion of approximately $0.04 per share and FY2027E accretion of approximately $0.13 per share.

Negatives

• The transaction is subject to regulatory approvals and third-party consents, which could delay or prevent the closing.
• The contingent consideration is subject to FCP achieving certain financial thresholds, which may not be met.
• FHI does not have recourse against the Selling Parties for breaches of representations and warranties, except in the case of fraud.

Risks

• The forward-looking statements included in this Form 8-K involve risks and uncertainties that could cause actual results to differ materially from those projected.
• Significant business, market, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond FHIs control.
• Other risks and uncertainties include the risk factors discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.

Future Outlook

The transaction is expected to close in the first half of 2026. Federated Hermes plans to expand its private markets business and develop product solutions for its clients. FCP is positioned to lead the private market expansion with Federated Hermes into Living sector assets in the U.S.

Management Comments

• J. Christopher Donahue, president and chief executive officer of Federated Hermes, said: We are delighted to announce the signing of the purchase agreement for this transaction today. Upon closing, this transaction will allow Federated Hermes to enter the U.S. Real Estate Market at a time when the Multifamily sector enjoys strong fundamentals and significant growth opportunities.
• Esko Korhonen, FCP Founding Managing Partner, said: In Federated Hermes, we have identified a firm with shared values and a strong commitment to building a private markets business. FCP is uniquely positioned to lead the private market expansion with Federated Hermes into Living sector assets in the U.S.

Industry Context

This announcement reflects a broader trend of asset managers seeking to expand their presence in the private markets space, driven by increasing investor demand for alternative investments and higher returns. The acquisition allows Federated Hermes to tap into the growing U.S. multifamily real estate market.

Comparison to Industry Standards

• Blackstone: AUM of $991 billion (as of Q3 2023), with a significant presence in real estate and private equity.
• Brookfield Asset Management: AUM of $850 billion (as of Q3 2023), with a focus on real estate, infrastructure, and renewable energy.
• Apollo Global Management: AUM of $631 billion (as of Q3 2023), specializing in credit, private equity, and real assets.
• Starwood Capital Group: AUM of approximately $115 billion, focused exclusively on real estate investments.
• The projected EBITDA multiple of 13.7x for FCP is within the typical range for asset management acquisitions, but the specific multiple depends on factors such as growth prospects, profitability, and market conditions.

Stakeholder Impact

• Shareholders: Expected to benefit from increased earnings per share and strategic growth.
• Employees: FCP employees will continue to manage investment portfolios and other aspects of the business from its current locations.
• Clients: Access to expanded investment solutions and expertise in the private markets asset class.

Next Steps

• Obtaining third-party consents.
• Expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
• Closing the transaction in the first half of 2026.

Key Dates

Recommendation

The acquisition of FCP Fund Manager is a strategic move for Federated Hermes, expanding its presence in the growing private markets sector and offering potential for increased earnings. The positive outlook and strategic rationale support a buy recommendation.

Keywords

Federated Hermes, FCP Fund Manager, real estate, acquisition, private markets, investment management, alternative investments, multifamily, FHI, FCP