Increasing pressures on fees and margins coupled with growing competition from ETFs and underperformance relative to benchmarks boosted M&A activity among asset and wealth managers last year.
The number of deals recorded in the asset and wealth management (AWM) space rose 5% to 140 but their cumulative value soared 72% to $14.9 billion, according to a new report from PwC. Four mega deals accounted for 85% of the total deal value in 2018 and three of them were announced in the fourth quarter.
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The four include Invesco’s $5.7 billion acquisition of Oppenheimerfunds, Hellman & Friedman’s $3 billion acquisition of Financial Engines and Victory Capital Holdings’ acquisition of USAA Asset Management for $1 billion.
As a result of its Financial Engines acquisition, Hellman & Friedman, which has a majority interest Edelman Financial Services, created the nation’s largest independent financial planning and investment management firm.
Invesco’s all-cash acquisition of Oppenheimerfunds leaves MassMutual, an insurance company, the largest shareholder in Invesco.
Looking ahead PWC expects “to see more deals as valuations normalize and owner managers adapt to a ‘new normal’ regarding margins and perceived enterprise value.” PWC also expects AWM margins will remain near 25% or higher, down from near 35% in the past, but still attractive.