Chris Donahue bets big on the future of Federated Investors with acquisition

So far, the integration has gone well. Hermes’ data are being added to Federated portfolio manager work stations as quickly as possible, and Federated is hiring to create a U.S. department that will serve active owners who are interested in socially responsible investing.

In addition, three new funds have been rolled out with three more expected this year, Hermes investment expertise has been presented to Federated’s institutional clients and Hermes products are being added to small managed accounts.

Federated’s London staff has moved over to Hermes’ office, and Hermes will be putting people in Federated’s Frankfurt office. The two operations in Dublin remain up in the air until Brexit is decided.

“We bought Hermes last summer, knowing full well that nobody knew what was going to happen with Brexit,” Donahue says.

Again, that signals a commitment to long-term decision-making, he says. It was the right thing to do, no matter what.

Two peas in a cultural pod

In Donahue’s experience, an acquisition’s success comes from the cultural fit and the business model.

“You get those two things right, nine out of 11 times, you’re going to do fine,” Donahue says.

It also requires perseverance, patience and an ability to stoop to conquer.

While it’s not always easy to gauge the cultural fit before the deal goes through, it is crucial to do so.

“You can’t buy a suit, figuring that you’re going to lose weight and go fit into it. It just doesn’t work,” he says.

Federated had five years of cultural due diligence with Hermes, and Donahue says they found similarities across the board. Federated has always had a culture that allows individuals dignity, where each employee has the ability to paint their own picture.

“They have to stay on the canvas because we have compliance rules, and we’ve got other canvases and other painters, but it shows that we support your creativity, knowledge and understanding of what you can do,” Donahue says.

The first time Federated met with Hermes executives, he says, they used the same example to describe how they saw themselves. The two companies also emphasize sustainable investing. With Federated, that means seeking investment performance excellence by keeping fiduciary duty front and center; for Hermes, that translates into a focus on environmental, social and governance criteria.

The people also were similar.

“If you took our head of HR and put her over in London, and took their head of HR and put him over here, you wouldn’t be able to tell the difference,” Donahue says.

The overlap between bonus plans, hiring practices, etc., is not 100 percent, but it is a thing of beauty, he says.