Compliance with the Labor Department’s fiduciary rule, demographic and investing shifts, revenue and cost synergies as well as access to new technology tools will continue to drive mergers and acquisitions activity in this year — with 44 deals occurring in the first quarter, according to the just-released Casey Quirk Investment Management M&A Outlook.
Two of the biggest deals so far this year were Standard Life Plc, Scotland’s largest insurer, agreeing in early March to acquire Aberdeen Asset Management Plc for about 3.8 billion pounds ($4.7 billion), as well as Janus Capital Group Inc.’s planned merger with Henderson Group.
Casey Quirk, a practice of Deloitte Consulting LLP, expects 2017’s M&A volume to likely outpace the last two years.
In 2016, 133 mergers and acquisitions occurred in the asset management and wealth management industries, down slightly from 145 in 2015, but with a higher average deal value, up from $240.9 million in 2015 to $536.4 million last year, the study found.
During 2016, succession planning and liquidity drove a number of transactions among U.S. wealth managers as many U.S.-based financial advisors reached retirement age, the study notes.
However, secular, more strategic trends also spurred deals:
• Consolidation, as various smaller wealth managers sought to improve profitability through economies of scale;
• Labor’s fiduciary rule, which is anticipated to raise compliance costs on smaller wealth managers;
• Access to new technologies and processes, not only to secure efficiencies but also as a response to the improved customer experience promised by increasingly prevalent robo-advisors;
• A drive to access a wider range of clients, as registered investment advisors in different geographies merged their books of business; and
• Bank and insurer interest, as some financial services companies secured wealth management skills to offer existing clients.