Mergers and acquisitions in the asset and wealth management
industry declined in the second quarter after coming to a near
halt in June, according to consulting firm PwC.
The number of deals fell 32 percent from the first three
months of the year, PwC said in a report Thursday. There were 28
transactions during the second quarter, down from a surging 41
in the first quarter.
Potential buyers were concerned about low price-to-earnings
multiples, poor performance and outflows of capital from asset
managers, according to PwC. This curtailed deal making, which
many asset managers have viewed as a way to gain scale and
survive increasing pressure on fees they charge clients.
Traditional asset managers, large and small, have been
impacted the most in this environment, PwC said in the
report. There are still certain alternative asset
managers who continue to see growth and strong returns but a
vast majority of players are facing industry challenges and
need a strategic partner.
Major deals in the second quarter included the acquisition
of wealth-management firm Focus Financial Partners by Stone
Point Capital and KKR & Co, according to PwC. Focus
Financial announced the deal in April, saying
the majority stake purchased by the private-equity firms valued
the company at $2 billion.
Also in April, Raymond James Financial said its
asset management unit Carillon Tower Advisers was buying Scout
Investments and Reams Asset Management from UMB Financial Corp.
Scout, an equity asset manager, and Reams, and
institutional-focused fixed-income specialist, have a combined
$27 billion under management and advisement, according to the
Raymond James statement.
Major active fund managers are struggling with consumer
expectations for lower fees, according to PwC. The major shift
to less expensive passive fund management has increased the
need for M&A at the same time that its deterring
strategic buyers, according to Andy Levine, co-chair of private
equity at law firm Jones Day.
Among the larger mergers announced in the first quarter was
the deal struck between Standard Life and
Aberdeen Asset Management as they faced lower returns and
increased competition for assets. Under the agreement announced
in March, Standard Life will pay £3.79 billion (about $5
billion) for its purchase of Aberdeen.
[II Deep Dive: More M&A Likely in Asset
Levine is skeptical that the slowdown in merger activity
will persist, saying the volume was so heavy in the first three
months of the year that the market was likely to pause.
Meanwhile, the underlying trends that have spurred M&A in
the first place havent disappeared.
Concern about slower organic growth or lower margins,
those are all the macro factors that cause strategics to look
at M&A, said Levine, adding that he expects deal
volume among asset managers to bounce back in the second half
of the year.