Over the course of the last few months—actually one could say the last few years—we witnessed a number of mergers and acquisitions in the asset management industry, which are somewhat reshaping the landscape of the global asset management industry. As these activities are happening in all parts of the asset management value chain, I view these corporate transactions rather as clear signs of a matured industry, and not a general consolidation. That said, some of the takeovers are leading to consolidation within their sectors since the number of competitors within these sectors will shrink after the transaction and/or the dominance of a single company will increase. One example of this is the takeover of the investors servicing business of Brown Brothers Harriman by State Street, which has been announced on September 7, 2021, since this merger will shrink the number of competitors within the asset servicing industry and will make State Street the number one asset servicer globally.
At the same time, State Street talks with other asset managers about a possible sale of its ETF business SPDR. If this deal finally happens, the business model of State Street will change massively, as the company will be focused on servicing the assets of the investment industry instead of also having a business that competes with its clients.
On the other hand, the new owner of State Street’s ETF business will automatically be in the group of the largest promoters of ETFs globally, which means that this transaction has the potential to create another giant within the ETF industry.
Other transactions like the takeover of NN Investment Partners by Goldman Sachs are creating scale and distribution power for the acquiring company, but won’t lead to a major change within the investment industry landscape.
The same is true for transactions which are strengthening the product preposition of a single asset manager such as the recently announced acquisition of Aviva Investors’ IG credit desk and the custom indexing provider O’Shaughnessy Asset Management by Franklin Templeton. Both transactions are helping Franklin Templeton to strengthen its asset management expertise and its product offering, but will not broadly change the global investment industry.
These examples show that there is a lot of mergers and acquisitions activity going at all levels of the investment industry. But as pointed out before, I don’t think that we are witnessing the beginning of a huge consolidation wave. Nevertheless, as big is beautiful in most parts of the financial and investment industry, we will see further mergers in the asset management industry as acquisitions are kind of a fast track to gain scale and market share. That said, not all of these corporate transactions will be successful, as the new owner has to convince customers and talent that the new company is at least as good for them as the old one was. This means the ability to integrate the corporate culture of the acquired company would be one of the key drivers for the success of a merger.
The views expressed are the views of the author, not necessarily those of Lipper or Refinitiv.
