M&A activity in the asset management industry will likely pick up in the next 12-24 months, says Moody’s. Factors fueling the activity include improving economic conditions, low capital markets volatility, stronger earnings and cash positions and favorable financing markets.
That’s because the asset management industry greatly benefits from scale, adds the rating agency. Small groups of firms are increasingly capturing outsized share of new client flows in each of the industry’s key market segments.
“Asset managers are motivated to buy now given an improving macroeconomic picture combined with financial positions that are back at or stronger than pre-crisis levels,” says Robert Callagy, a Moody’s senior vice president. “In addition, sellers are also likely to act now since business fundamentals have improved in the past several years and valuations are also higher.”
In addition, Moody’s says there are two types of sellers; small players that are repositioning, and larger players such as banks or insurers that are divesting to rationalize costs or avoid regulatory requirements. The agency expects larger players will continue to sell their asset management businesses, given the increased implementation of new global financial regulations.
The firm notes recent M&A transactions include Man Group’s announcement of its intention to purchase Numeric Holdings LLC, TIAA-CREF’s $6.25 billion acquisition of Nuveen announced in April, and Standard Life Investment Ltd’s purchase of Ignis Asset Management announced in March.