Virtus Investment Partners (VRTS) M&A Announcement summary

Deal rationale and strategic fit

• Expands investment capabilities into private markets, particularly asset-based private credit and real estate, addressing demand for uncorrelated income and diversification.

• Keystone brings a differentiated asset-centric private credit platform with a strong track record and experienced team.

• Leverages Keystone's established presence in the wealth channel and aims to broaden reach to institutional clients and pursue product extensions.

• Both firms share a focus on investment excellence, client outcomes, and long-term value creation, with strong cultural and strategic alignment.

• Management retains significant equity and long-term incentives, supporting sustainable growth.

Financial terms and conditions

• Acquiring a 56% majority stake in Keystone for $200 million, funded with existing balance sheet resources.

• Up to $170 million in deferred consideration over two years, including earn-out payments tied to revenue targets.

• Keystone management retains 44% ownership, with options to increase ownership to 75% in years three to six.

• Transaction expected to be immediately accretive to margins and non-GAAP EPS upon closing in Q1 2026, with anticipated 200 basis point margin expansion and $1.50 EPS contribution (as adjusted) in 2026.

• Estimated to generate ~$5 million in annual tax savings from intangible assets.

Synergies and expected cost savings

• Not a cost-synergy-driven deal; focus is on growth and expanding distribution rather than expense reduction.

• Keystone will benefit from Virtus' distribution, marketing, and client service capabilities, enabling greater capitalization on investment opportunities.

• High margin business with significant operating leverage and strong organic growth.

• Transaction is immediately accretive to adjusted EPS.