US - Firms buying asset managers are paying too much for less profitable firms, and in most cases their new subsidiaries wind up growing more slowly than their peers, according to Cerulli Associates (CA).
In its latest report, entitled ‘Targeted Perspective: M&A (Mergers & Acquisitions) in Global Asset Management’, Cerulli examines asset-gathering strategies used by the largest global fund managers, which oversee nearly $34trn in assets under management (AUM). The research focusses on more than 300 M&A transactions in fund management since 1990, including a proprietary analysis of more than 60 specific transactions to determine post-transaction AUM growth rates.
Cerulli found that roughly 65% of the US target firms failed to grow faster than the industry, in terms of AUM, after a transaction. Even worse, roughly half of the firms that trailed industry benchmarks after the transaction were actually surpassing industry growth rates before they were bought.
Moving abroad, Cerulli found that UK-based targets of recent mergers and acquisitions in fund management tend to outperform their local peers following a transaction, but actually lag global benchmarks over time. Cerulli’s report also finds that Continental European acquirers have tended to grow their new asset subsidiaries faster than industry median growth rates, while the majority of US-headquartered buyers experienced trouble doing so.
Cerulli found that roughly two-thirds of British target firms in fund management M&A grew faster than the UK fund management industry following a deal - but failed to beat expansion in the global fund management marketplace, where assets under management grow at nearly twice the speed.
By Janet Du Chenne
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