Funds management industry faces radical reshaping through M&A activity

Mergers and acquisitions among funds managers will continue at a steady pace for the remainder of this year as capital market stresses recede around the world, according to the latest report from Jefferies Putnam Lovell, a management consultancy.

M&A activity was lower in the six months to June than the previous corresponding period – 72 deals against 109 previously – but the total value of the deals was way up – $14.1 billion compared with $7.7 billion previously – thanks largely to the purchase of Barclays Global Investors by BlackRock. This deal, which is still to be completed, is worth $13.5 billion.

The total of funds under management transacted was also significantly higher at $2.3 trillion (compared with $588 billion previously) thanks to the BGI purchase, which accounted for $1.5 trillion of the assets.

Divestitures of funds management arms by banks and others looking to shore up their capital bases – such as the BGI deal – accounted for nearly half of the deals in the past six months.

And, according to Aaron Dorr, a New York-based managing director of Jefferies Putnam Lovell, divestitures are likely to remain the driving force of M&A activity for the rest of this year as the funds management industry faces its most radical reshaping on record.

Other themes surrounding deals in the past six months included pure-play asset managers seeking to add scale, fill product gaps and add talent as well as private equity firms being drawn to the industry’s growth and profit potential, Dorr said.

Apart from the BGI deal, other large transactions announced during the past six months included Aquiline Capital Partners’ purchase of Conning & Company, JP Morgan Chase’s purchase of a minority stake in Highbridge Capital which it did not already own and Woori Finance’s purchase of Credit Suisse’s 30 per cent of Woori Credit Suisse Asset
Management.