With the Dow Jones industrial average finally passing the
20,000 milestone, asset managers in the middle of M&A deals
will be pushing to get them signed and delivered. But once that
surge of transactions is finished, mergers and acquisitions in
the industry may begin to slow this year after a busy 2016 for
deals, according to new research.
Even though deal making will continue, firms will likely
exercise greater caution given the new presidential
administration of Donald Trump, according to Aaron Dorr,
principal and head of asset management investment banking at
Sandler ONeill & Partners, which just published its
2016 Asset Manager Transaction Review & Forecast. Dorr
explains that buyers and sellers will go slower as the year
unfolds, watching the effect the Trump administration will have
on financial regulation, taxation and the global economy.
Buyers will also be pickier when it comes to choosing what to
We will see more consolidation than in the past. Buyers
are being more selective, however, and focused on getting
underneath the businesses that they are buying to convince
themselves of the growth or cost synergies, says
According to Sandler ONeills research, 149 deals
were completed in 2016, compared with 148 in 2015 and 135 in
2014. Although the number of deals in the past three years has
held fairly steady, last years transactions were worth a
combined $17.1 billion, up 82 percent from the previous year.
The increase was driven by a few large deals, including
UniCredit selling Pioneer Investments to Amundi in a deal worth $3.7 billion and Henderson Group and
Janus Capital Group merging in a $2.6 billion deal.
Sandler ONeill also reports that the most popular
acquisition targets have been firms operating international and
global equities strategies, as well as fixed income. These
strategies have not been hit as hard by investors move to
This year Dorr expects sellers of all asset management firms to
focus in particular on future partners that can offer
high-growth sales opportunities. Many firms have not had good
organic growth in recent years, and they need new ideas and
capabilities for distribution. When it comes to managers that
cater to institutional investors, sellers will have good
options with strategic buyers only if their performance is
good, says Dorr.
If a pension fund has a mandate with a struggling manager
that gets bought, they wont stick around if the buyer is
looking to reassign portfolio management responsibilities, even
if its likely to be positive, says Dorr.
Theyll just put out an RFP and start
According to the report, there will continue to be a
wider-than-normal spread between the prices that good
businesses will fetch compared with more mediocre asset
managers. In addition, the report points to continued interest
in alternative-investment firms.
Youll see traditional managers going after firms
that offer investment strategies with longer locks on capital.
Theres less risk of investors fleeing, at least in the
short term, and this can offset other outflows, says
Dorr. These strategies, such as real estate,
infrastructure, and private debt, also happen to be in demand
Dorr says asset management transactions in 2016 were driven not
just by the headwinds from the decreasing popularity of active
The industry is mature, he says. If you
decompose the growth of many traditional firms, youll see
that AUM is being propped up by the friendly equity and credit
markets of the past five years. That cant be relied on.
But one thing you can bank on is the cost savings that come