More Asset Management M&A Is Coming

Demand for ESG and crypto will fuel deals in the next six months, according to PwC.

Bing Guan/Bloomberg

Bing Guan/Bloomberg

Asset and wealth management M&A is expected to continue with strong momentum for the rest of the year.

In PwC’s 2021 midyear outlook for the sector, expected to be published Tuesday, the advisory firm noted that there has been “a flurry of deal activity” in the first half of the year with large transactions, such as the $2.1 billion sale of Wells Fargo’s asset management division and Macquarie’s $1.6 acquisition of Waddell & Reed. In the next six months, PwC analysts expect asset management and wealth deals to continue on this upward trend, attributing future activity to pre-existing wealth management deal momentum, increased emphasis on environmental, social, and governance investing strategies, and continued “innovation” through mergers and acquisitions.

Authors Gregory McGahan and Arjun Saxena predicted investor confidence will increase as a result of impending IPO listings, like Robinhood and eToro, which will, in turn, fuel the momentum in wealth management dealmaking.

“There is a long tail of digital brokerages (including those that target investors in other markets), crypto brokerages and picks-and-shovels businesses that serve them waiting in the wings for potential fundraising or consolidation deals,” the report said. “Many of the soon-to-be-public players can also be expected to start using their richly valued stocks as acquisition currency to bulk up further.”

What’s Driving Deals

The authors also expect money managers to tap into markets that are currently “underserved” when it comes to ESG investing, another trend that will contribute to increased asset and wealth management deal activity.


“Outside of traditional money managers, we are also seeing an increasing number of cross-sector companies, such as insurers, looking to gain exposure to sustainable investments by teaming up with asset managers and providing seed capital to fund sustainable investment strategies or investing directly in sustainable investment vehicles,” PwC said in the report.

McGahan and Saxena also predicted that hedge funds and alternative asset managers will continue attempts to diversify their portfolios by investing in digital assets, particularly cryptocurrencies. They noted that asset and wealth managers are continuing to use M&A activity as “a tool to expand into new product classes.”

“Beyond asset managers looking to broaden their capabilities, we continue to see the convergence of insurance companies and asset managers as a key area of transformation for many companies to broaden their horizons,” the report said.

For special-purpose acquisition company sponsors, the next six months will look a little different. According to the report, SPAC deals have hit their peak and, because of regulatory scrutiny and accounting issues, will continue to slow in fundraising.

“While there are a number of SPAC merger-IPO deals expected to come to market in the near-term given the backlog of more than 400 SPACs currently looking for targets, many SPAC sponsors will find it more difficult to close deals,” the report said. “In particular, we have observed increased difficulty securing PIPE financing as institutional investors take a more conservative view on valuation and dilution concerns following some high-profile recent listings slipping below the $10 threshold.”