Financial Institutions M&A sector trends: Asset/wealth management — H1 2020 and outlook for H2 2020

Differing bank prerogatives drive deal-making—-some European banks tag-out from non-core business lines, while others tag-in for stable returns.

Overview

CURRENT MARKET

• Consistent activity levels

WE ARE SEEING

• Market consolidation as smaller asset / wealth managers consolidate in the COVID-19 climate— mostly smaller deals (>7 smaller UK deals), with a sprinkling of medium-sized deals
• Differing bank prerogatives:
  • Some banks tag-out (e.g., Banco Sabadell's disposal of Sabadell Asset Management)
  • Other banks tag-in (e.g., Andbank's acquisition of Esfera Capital)
• Specialist asset management sub-sector consolidation:
  • Fund platform (e.g., Clearstream's acquisition of 51.2% of UBS Fondcenter)
  • Debt servicing (e.g., Cerved's acquisition of 50.1% of Quaestio)
  • Trust administration (e.g., Intertrust's acquisition of Wells Fargo Trust Corporation)
  • Direct lending (e.g., Bridgepoint's acquisition of EQT's credit business)

KEY DRIVERS/ CHALLENGES

• COVID-19 exacerbates industry-wide pressure on profitability:
  • Customers tightening belts and reducing spend
  • Shift towards market-driven pricing on account of MiFID II fee transparency requirements
  • Increasing customer familiarity / confidence with WealthTech (Smarterly, Alpian, Capdesk and InvestSuite all successfully raised growth capital notwithstanding COVID-19 chaos)
• Tagging-out:
  • Monetisation of non-core assets—wide potential buyer universe (e.g., local / foreign trade, PE and insurers)
  • Favouring lower-cost WealthTech opportunities (e.g., Hauck & Aufhäuser's wealth management partnership with Raisin)
• Tagging-in:
  • Seeking stable returns (e.g., FNZ's acquisition of Irish Progressive Services International)
  • Tapping into new customer bases (e.g., J.P. Morgan's acquisition of remaining 49% of China International Fund Management)
• Implementation of digitalisation strategies (e.g., Deutsche Bank's equity investment in Qplix)

TRENDS TO WATCH

• Stressed / distressed opportunities involving smaller asset / wealth managers with high cost bases
• Consolidation amongst direct lenders / credit managers
• Will the FCA's DP20/2 proposals for a new UK capital regime for investment firms level the playing field, or create winners and losers

OUR M&A FORECAST

Consolidation activity to continue as COVID-19 exacerbates profitability pressures and turbocharges customer familiarity with more costeffective WealthTech options

Publicly reported deals & situations

BlackRock, Vanguard and State Street have seen their assets shrink by an estimated US$2.8 trillion in 2020 as a result of recent market chaos caused by the COVID-19 pandemic (FT - March 2020)

Market consolidation

Market highlight:

Tilney's and Smith & Williamson's successful merger to create Tilney Smith & Williamson, the UK's leading integrated wealth management and professional services business, with approximately £44 billion in AuM and co-investments from Warburg Pincus and Permira

Larger:

• Tilney (UK): Acquisition of Smith & Williamson (September 2019)

Mid-sized:

• PGA & Banco Santander Totta (Portugal): Merger of asset management operations (April 2020)
• Credit Suisse Asset Management (Switzerland): Acquisition of AgaNola (March 2020)
• ARA Asset Management (UK): Acquisition of majority stake in Venn Partners (March 2020)
• Jupiter Fund Management (UK): Acquisition of Merian Global Investors (February 2020)
• Denge Varlik and Deren Varlik Yonetim (Turkey): Merger of asset management operations (January 2020)
• Amundi (Spain): Acquisition of Sabadell Asset Management (January 2020)

Smaller:

• Pacific Asset Management (UK): Acquisition of Parallel Investment Management (June 2020)
• Jupiter Fund Management (UK): Acquisition of Merian Global Investors (May 2020)
• Andbank (Spain): Acquisition of Degroof Petercam's Spanish private banking business (May 2020)
• Quintet Private Bank (Switzerland): Acquisition of Bellevue Group's wealth management business (May 2020)
• Fairstone (UK): Acquisition of Goodman Chartered Financial Planners (April 2020)
• Stonehage Fleming (UK): Acquisition of investment management activities of Cavendish Asset Management (April 2020)
• Ascot Lloyd (UK): Acquisition of Ring Associates (April 2020)
• Rathbone Brothers (UK): Acquisition of Barclays Wealth Management (April 2020)
• Capitalworks PEP (South Africa): Acquisition of Peregrine Holdings (March 2020)
• Hauck & Aufhäuser (Germany): Acquisition of Bankhaus Lampe (March 2020)
• Mattioli Woods (UK): Acquisition of Hurley Partners (March 2020)
• Ypsilon Capital (Greece): Acquisition of Attica Wealth Management (February 2020)
• AgioFunds TFI (US): Acquisition of 30% of Symphony Wealth Management (January 2020)
• eQ Asset Management (Finland): Acquisition of business of Best Global Ideas and European Small & Mid Cap (January 2020)

Differing FI prerogatives

Tag-out (disposals):

• Bellevue Group (Switzerland): Disposal of wealth management business (May 2020)
• Grupo Esfera (Spain): Disposal of Esfera Capital Gestion (March 2020)
• Attika Bank (Greece): Disposal of Attica Wealth Management (February 2020)
• Banco Sabadell (Spain): Disposal of Sabadell Asset Management (January 2020)

Tag-in (acquisitions):

• Singular Bank (Spain): Acquisition of MG Valores (June 2020)
• Andbank (Andorra): Acquisition of Esfera Capital Gestion (March 2020)

Tag-in (JVs):

• Investcorp (Bahrain): Establishment of JV with Tages, Investcorp-Tages (May 2020)
• BNP Paribas (France): Investment management integrated solutions JV with BlackRock's technology platform, Aladdin Provider (April 2020)

Fund platform M&A

• Netfonds (Germany): Acquisition of Easyfolio (June 2020)
• J.P. Morgan (China): Acquisition of remaining 49% of China International Fund Management (April 2020)
• Clearstream (Switzerland): Acquisition of 51.2% of UBS Fondcenter (January 2020)

Debt-servicing M&A

• DoValue (Greece): Acquisition of 80% of Eurobank Financial Planning Services (December 2019)
• Bogazici Varlik Yonetim (Turkey): Acquisition of Vera Varlik Yonetim (May 2020)
• Cerved (Italy): Acquisition of 50.1% of Quaestio Cerved Credit Management (February 2020)

Trust administration M&A

• Sanne (UK / Cayman Islands): Acquisition of Inbhear Fund Services and Inbhear Management Services (January 2020)
• Intertrust (UK): Acquisition of Wells Fargo Trust Corporation (January 2020)
• ZEDRA (Singapore): Acquisition of BNP Paribas Singapore Trust Corporation Limited (January 2020)

Direct lending M&A

• Bridgepoint (Sweden): Acquisition of EQT Partners' credit business (June 2020)

High investor appetite

Deal highlight:

White & Case advised Catella Group, a Sweden-based specialist in property investments and fund management, on its sale of 70% of fund manager Catella Fondförvaltning to Athanase Industrial Partner

Financial sponsors (acquisitions):

• Athanase Industrial Partner (Sweden): Acquisition of 70% of Catella Fondforvaltning (June 2020)
• Nordic Capital (Sweden): Acquisition of Max Matthiessen (May 2020)
• Bridgepoint (France): Acquisition of 20% of Cyrus Conseil (April 2020)
• AnaCap (UK): Acquisition of Wealthtime (February 2020)
• CBPE Capital (UK): Equity investment in Perspective Financial (January 2020)

Financial sponsors (WealthTech funding rounds):

• Major Oak: Participation in £7 million Series A funding round for Smarterly (May 2020)
• Fuel Ventures: Participation in £3 million Series A funding round for Capdesk (April 2020)
• PMV: Participation in €2 million Seed funding round for InvestSuite (April 2020)

SWFs (WealthTech funding rounds):

• GIC: Participation in US$107 million Series D funding round for Pagaya (June 2020)

Trade consolidators:

• City of London Investment Group: Acquisition of Karpus Management (June 2020)
• Natixis Investment Managers: Equity investment in Smart Pension (May 2020)

Foreign investors:

• Pinnacle Investment Management (UK): Equity investment in Aikya Investment Management (May 2020)

Market appetite:

• Ninety One (South Africa): £1.2 billion LSE and JSE IPO (March 2020)

Insurers:

• Prudential (China): Asset management JV with CITIC Group (April 2020)

New markets / business lines

• KBC (Belgium): Launch of everyoneINVESTED (April 2020)
• Vanguard (UK): Launch of UK investment advisory services (January 2020)

Digitalisation marches on

Established players believe in WealthTech:

• Refinitiv: Acquisition of Scivantage (March 2020)
• Deutsche Bank: Equity investment in Qplix (March 2020)
• Credit Suisse Asset Management: Acquisition of NorthPoint Technology (February 2020)
• FNZ: Acquisition of Irish Progressive Services International (February 2020)
• DWS Group: Acquisition of 24.9% of Arabesque AI (January 2020)

Established players partner with WealthTech:

• FNZ: Blockchain-enabled administration utility JV with FinSwitch (May 2020)
• Hauck & Aufhäuser: Wealth management partnership with Raisin (April 2020)
• Deutsche Bank: Extension of wealth management alliance with Avaloq (April 2020)

Innovation consortia:

• Clearstream, Credit Suisse Asset Management, Luxembourg Stock Exchange and Natixis Investment Managers: Collaboration on DLT-based platform for investment funds FundsDLT (March 2020)

Start-up support:

• Fidelity: Launch of Silicon Roundabout digital hub (January 2020)

Inorganic growth by WealthTech:

• Finantix: Acquisition of InCube (March 2020)

Click here to download Financial services M&A experiences shortness of breath in H1 2020 (PDF)

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