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Summary of Global Asset & Wealth Managers M&A Trends

Core Content

This report from Credit Suisse outlines the ongoing and expected continuation of a significant M&A wave in the global asset and wealth management industry. Despite the challenges posed by the Covid-19 pandemic, 2020 saw record M&A activity, with the trend expected to persist into 2022. The analysis is based on insights from 15+ financial services analysts across EMEA, APAC, and LatAm, as well as public statements, media reports, and merger models.

Main Reasons for Continued M&A Activity

1. Expansion of Investment Capabilities: Asset managers seek to enhance their offerings in high-growth areas such as private markets, ETFs, ESG, and direct indexing.
2. Improvement in Distribution Scale and Breadth: Larger scale and broader distribution channels are critical, especially in the US and European retail markets.
3. Earnings Accretion and Low Valuations: US traditional asset managers are trading at historically low valuations (5–10x NTM EPS), making them attractive targets for acquisition.
4. Visible Bank and Insurance Buyers: Major banks like JPMorgan, State Street, and UBS are actively seeking to acquire asset managers to reduce asset sensitivity and improve ROE.
5. Visible Sellers: Several banks, including Banco do Brasil and BBVA, have expressed interest in selling their asset management subsidiaries.
6. Investor Activism: Activist investors like Brian Partners are pushing for M&A to unlock value, particularly in the US.
7. Potential Rise in US Capital Gains Taxes: Higher taxes may accelerate M&A activity, especially in the RIA and multi-manager sectors.

Key Players in M&A

Likely Buyers

• DWS Group: Active in M&A, complementing organic growth.
• Franklin Resources (BEN): Historically active in M&A.
• Invesco (IVZ): Influenced by activist shareholder Brian.
• JPMorgan Chase & Co. (JPM): Publicly interested in asset management acquisitions.
• Patria Investments (PAX): Likely to acquire private markets managers in LatAm post-IPO.
• State Street Corp. (STT): Interested in acquiring asset management businesses.
• UBS Group AG (UBSG): Evaluating complementary M&A targets.
• Focus Financial Partners (FOCS): Expected to be active due to potential tax changes.
• CI Financial (CIXX): Continues to roll up asset and wealth management firms.
• Affiliated Managers Group (AMG): Shifting to growth capital investments.
• Standard Life Aberdeen (SLA): Likely to use surplus capital from HDFC Life sale for M&A.
• Man Group (EMG): Strong balance sheet and interest in private markets expansion.

Likely Sellers

• Banco do Brasil's Brazilian asset manager: In discussions with UBS.
• BBVA's Spanish asset manager: Selling non-core subsidiaries.
• Cohen & Steers (CNS): Could be acquired to broaden real estate capabilities.
• Janus Henderson (JHG): Active in M&A, with Brian's influence.
• WisdomTree (WETF): Close to a sale with JPM two years ago.
• Victory Capital (VCTR): Evaluating offers as a fiduciary.
• Invesco (IVZ): May be encouraged to sell due to Brian's past exits.

Key Geographical Insights

United States

• M&A is the most active in the US, driven by fragmentation, scale advantages, and slowing growth.
• Banks are increasingly interested in acquiring asset managers to improve distribution and reduce asset sensitivity.
• Activism is rising, with Brian Partners pushing for M&A.
• US traditional asset managers are undervalued, attracting cross-border buyers.

Europe

• M&A is driven by expansion, economies of scale, and access to technology.
• Examples include Amundi’s acquisitions and Jupiter-Merian merger.
• European traditional asset managers trade at 13x NTM EPS, making them attractive for US expansion.

China

• Growth potential is high due to its large population and increasing wealth.
• Deregulation and foreign capital inflows are expected to lead to new fund management companies.
• BlackRock and Invesco are well-positioned with local joint ventures.

Japan

• M&A is driven by digital offerings, cost savings, and access to HNW/UHNW investors.
• Banks and insurance companies are interested in the asset management sector due to low regulation and capital-light operations.

Canada

• Retail distribution is dominated by large banks like TD and RBC.
• M&A is expected to occur domestically, with some expansion into public strategies.

Australia

• Growth in foreign markets and ESG exposure are key drivers.
• Australian banks are more likely to sell their asset management divisions than buy them.

Brazil

• Low interest rates have spurred demand for equities and alternatives.
• Independent firms like Patria and Vinci have IPO’d to gain access to capital for M&A.

India

• Represents a major growth opportunity due to its expanding population and wealth.
• The industry is concentrated among local firms, making it difficult for foreign managers to grow without proprietary distribution.

Investment Conclusions

• M&A is a strategic tool for asset managers to improve capabilities, distribution, and profitability.
• Strategic M&A is more successful than expense-driven deals, which historically have lower success rates.
• Cross-border M&A is likely to increase due to valuation differentials.
• Shareholder activism will continue to influence M&A decisions.
• The most successful M&A transactions historically include BlackRock's acquisition of BGI and Blackstone's purchase of GSO.

Two Main Types of Deals

• Strategic M&A: Focuses on adding capabilities in high-growth areas like ETFs, ESG, and private markets.
• Consolidation M&A: Driven by scale and cost synergies, but often faces challenges like performance attrition and dis-synergies.

Valuation Differentials

• US traditional asset managers trade at a discount (10x NTM EPS) compared to non-US traditional (13–16x) and alternative (20–25x) asset managers.
• This differential encourages cross-border M&A activity, especially from Australia to the US.

Summary Conclusions by Geography

• United States: Fragmentation, scale, and slowing growth are key drivers.
• Europe: Expansion, cost synergies, and technology access are primary motivators.
• China: Deregulation and foreign capital inflows support growth.
• Japan: Digital offerings, cost savings, and HNW access are key.
• Canada: Domestic M&A and proprietary distribution are central.
• Australia: Expansion into foreign markets and ESG are main drivers.
• Brazil: Low interest rates and domestic demand fuel M&A.
• India: Organic growth is hindered by lack of proprietary distribution, leading to foreign exits.

Research Analysts

• Craig Siegenthaler, CFA
• Haley Tam, CFA
• James Cordukes, CFA
• Adrian Cighi, CFA
• Ashish Gupta
• Farooq Hanif, FIA
• Chung Hsu, CFA
• Susan Roth Katzke
• Andrew Kligerman
• Makoto Kuroda
• Jon Peace
• Mike Rizvanovic
• Marcelo Telles, CFA
• Charles Zhou, CFA
• Kareem Afifi
• Samantha Platt
• Leo Liu
• Gautam Sawant, CFA