Investors Brace for M&A Wave Slashing Asset Managers by a Third

Investors Brace for M&A Wave Slashing Asset Managers by a Third

The asset management industry is beset by a variety of forces that are driving increasingly brisk M&A action among the players. “The industry is going through dramatic changes right now. Winners and losers are being created today like never before. The strong are getting stronger and the big are going to get bigger,” as Martin Flanagan, CEO of Invesco Ltd. (IVZ), told the Financial Times. Flanagan believes that one-third of asset management firms could disappear through mergers in the next five years.

“Several forces impact transactions, including fee pressures from low-cost passive managers, the challenge most active managers face in beating benchmarks, and significant pressure on [profit] margins and AUM [assets under management],” according to a comprehensive report from PricewaterhouseCoopers (PwC), as quoted by Institutional Investor. Key statistics compiled by PwC are summarized in the table below.

2018 M&A Highlights in U.S. Asset Management

  • 140 deals valued at $14.9 billion in total
  • Total deal value up 72% from 2017
  • Biggest annual increase since 2009
  • 3 deals worth $1 billion or more in 4Q 2018 alone
  • Invesco buys OppenheimerFunds from MassMutual for $5.7 billion

Source: PricewaterhouseCoopers, as reported by Institutional Investor

Significance for Investors

Looking Ahead

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