Consolidation in Asset Management:

In the fourth of a series of live webinars hosted by the Financial Times in partnership with State Street, join investment leaders as they discuss the outlook for consolidation in the asset management sector, and the key steps to creating and executing a winning deal.

Mergers and acquisitions are coming back to the table for asset managers, as valuations and AUM decline, and well capitalised institutional investors look to rebuild, access new markets, acquire new capabilities and drive cost synergies.   In these uncertain times, however, there are stumbling blocks.  Is it the right environment to look to expand via a merger or acquisition, and what are the secrets to achieving a successful deal in the long-term?  

Though 2019 saw strong appetite for M&A in asset management, how have the dynamics changed as a result of COVID-19 and where are opportunities opening up from bolt-ons for growth to enterprise-wide M&A?   How are transactions being approached in this new normal given the challenges of performing due diligence amid volatile markets and unpredictable asset valuations?  As business leaders look to use M&A as a way to re-establish and grow post-Covid, what lessons can be learned from previous deals and where are the critical risks?

• M&A in asset management is expected to grow in 2021 and beyond.  Though valuations are difficult in the current market, recent surveys suggest that around 50% of asset managers expect greater consolidation across the industry in the next 10 years.  The question remains as to whether firms need to be bigger to effectively compete, and how boutique organisations will fit into the evolving landscape.

• The key drivers influencing consolidation in the industry include increasing regulation, pricing and fee pressures, and product targeting. Profitability is also a major factor as margins look set to fall, despite a widespread increase in assets under management.

• More subtle drivers include the need for asset managers to adapt their operating model to reflect the changing demands of the business, particularly in terms of digitisation, disruption and distribution, 

• The targets for M&A are likely to adapt to the market environment. While in the past the focus has been on acquiring capabilities in passive asset management, it is likely that future consolidation, particularly after the experience of the pandemic, will seek to capitalise on the opportunity to differentiate perhaps by moving into private and or retail markets, and/or to expand distribution networks.

• Value creation, incorporating financial and operational synergies, client retention, capability building and technological and cultural integration, is one of the most important measures of success for a merger or acquisition. Missing in the current environment is the face to face interaction traditionally key to executing a successful deal.

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