www.winchestercapital.com 1 Global Asset Management M&A Insight 2016 Winchester Capital I. BANNER YEAR FOR USA ASSET MANAGEMENT M&A TRANSACTIONS 2015 has been a banner year for asset management merger and acquisition activity in the USA market. Total announced deal value in 2015 was a record $24.2 billion, an increase of $21.4 billion or 767% since 2011. The number of announced transactions (149) is at its highest level in the last four years. This trend is expected to continue through 2016, as current year-to-date announced transactions are forecasted to produce similar results. 2015 was also a record year for completed transaction value ($21.8 billion). Based on year-to-date transactions, the total volume and value of completed transactions has softened, however, there are nearly 50 transactions totaling $11.5 billion that are pending completion which could markedly impact these year- to-date figures. The US market trend of continued growth is also reflected in the global market. II. GLOBAL ASSET MANAGEMENT M&A MARKET Over the past five years there have been over 3,000 acqui- sitions of asset management companies of varying size. Of this amount, 10% have been made by publicly traded asset managers with market capitalizations greater than $1 billion. The asset management global M&A market has been quite active from 2011-2015, with an average of 511 transactions completed each year. Strong market conditions remain in place and should make for an active Q4 2016-2017. There continues to be increased availability of low cost debt for acquisitions. Recently, the United States Federal Reserve, Bank of England and European Central Bank have all elected to keep interest rates at record low levels. Combined with the fact that acquiring firms continue to have strong balance sheets, there is a large amount of liquidity in the asset management M&A market. Source: Standard & Poor’s Chart I: US Asset Management Announced Acquisitions Volume and Value 2011-2015 30 22.5 15 7.5 0 Number of Transactions Transaction Value USD Billions No. of Transactions 160 150 140 130 120 2011 2012 2013 2014 2015 Source: Standard & Poor’s Chart II: US Asset Management Completed Acquisitions Volume and Value 2011-2015 22 16.5 11 5.5 0 Number of Transactions Transaction Value USD Billions No. of Transactions 160 120 80 40 0 2011 2012 2013 2014 2015
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Global Asset Management M&A Insight 2016Winchester Capital
I. BANNER YEAR FOR USA ASSET MANAGEMENT M&A TRANSACTIONS2015 has been a banner year for asset management merger and acquisition activity in the USA market. Total announced deal value in 2015 was a record $24.2 billion, an increase of $21.4 billion or 767% since 2011. The number of announced transactions (149) is at its highest level in the last four years. This trend is expected to continue through 2016, as current year-to-date announced transactions are forecasted to produce similar results. 2015 was also a record year for completed transaction value ($21.8 billion). Based on year-to-date transactions, the total volume and value of completed transactions has softened, however, there are nearly 50 transactions totaling $11.5 billion that are pending completion which could markedly impact these year-to-date figures. The US market trend of continued growth is also reflected in the global market.
II. GLOBAL ASSET MANAGEMENT M&A MARKET Over the past five years there have been over 3,000 acqui-sitions of asset management companies of varying size. Of this amount, 10% have been made by publicly traded asset managers with market capitalizations greater than $1 billion. The asset management global M&A market has been quite active from 2011-2015, with an average of 511 transactions completed each year. Strong market conditions remain in place and should make for an active Q4 2016-2017. There continues to be increased availability of low cost debt for acquisitions. Recently, the United States Federal Reserve, Bank of England and European Central Bank have all elected to keep interest rates at record low levels. Combined with the fact that acquiring firms continue to have strong balance sheets, there is a large amount of liquidity in the asset management M&A market.
Source: Standard & Poor’s
Chart I: US Asset Management Announced AcquisitionsVolume and Value 2011-2015
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Source: Standard & Poor’s
Chart II: US Asset Management Completed AcquisitionsVolume and Value 2011-2015
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Global Asset Management M&A Insight 2016Winchester Capital
The global M&A Market has been active with a number of recent high profile mergers and acquisitions. In September, MassMutual completed a merger of four subsidiaries to create a $275 billion asset management company. Babson Capital Management (US), Wood Creek Capital Management (US), Cornerstone Real Estate Advisers (US), and Baring Asset Management (UK) were combined under the iconic brand of Barings. Additionally, the private equity firm Warburg Pincus is in talks to acquire a 49% joint venture with China’s Baosteel Group from Societe Generale, to tap into the growing mutual fund industry in China.
Since 2015, the largest concentration of asset management acquisitions representing $37.7 billion in value is in Europe and North America. Overall nearly 74% of all transactions in 2015-2016 have occurred in these key regions, which have seen an increase in their proportion of transactions since 2014, compared to a slightly declining percentage in Asia. In 2016, the value of completed transactions in North America is approximately $6 billion, with nearly $12 billion in transaction value pending completion. This suggests that there is potential for a robust asset management M&A market in Q4 2016 through 2017.
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Source: Standard & Poor’s
Chart III: Global Asset Management Completed Acquisitions Volume and Value 2011-2015
7060 5040 3020 10 0
Number of Transactions Transaction Value
USD
Bill
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Table I: Total Transaction Value for Global Asset Management M&A Market 2011-2016 ($m)
Source: Standard & Poor’s
Region 2011 2012 2013 2014 2015 2016 Totals
Europe 14.9 9.9 15.8 10.7 5.2 4.2 5.6 66.2Africa / Middle East 1.2 0.3 0.4 0.0 0.6 0.2 0.8 3.7United States and Canada 5.5 4.7 3.1 41.2 22.4 5.9 11.5 94.2Asia / Pacific 4.5 4.7 5.0 6.6 3.0 3.8 5.6 33.3Latin America and Caribbean 1.9 2.1 8.7 0.2 2.6 1.2 3.0 19.6Totals 28.1 21.7 33.0 58.6 33.7 15.3 26.5 $216.9
Announced Pending Completion
Table II: Total Number of Transactions for Global Asset Management M&A Market 2011-2016
Source: Standard & Poor’s
Region 2011 2012 2013 2014 2015 2016 Totals
Europe 191 188 168 176 186 116 59 1,084Africa / Middle East 23 19 19 16 14 12 7 110United States and Canada 230 186 193 174 177 107 82 1,149Asia / Pacific 100 101 99 89 92 56 60 597Latin America and Caribbean 15 21 40 16 26 18 9 145Totals 559 515 519 471 495 309 217 3,085
Announced Pending Completion
Global Asset Management M&A Insight 2016Winchester Capital
The median completed global EBITDA multiple for 2011-2016 global asset management M&A transactions is 10.7x. Overall, median transaction multiples have been trending down from 2011-2015, reaching a low value of 7.7x. The 2016 year-to-date median EBITDA multiple has increased to 9.4x, an increase of 23% from the prior year’s multiple, however this value is still below the full sample median value, suggesting there is still value in asset management transactions. The decreasing trend of transaction multiples and the availability of lower cost debt create ideal market conditions for acquiring firms interested in increasing global AUM.
III. ASSET MANAGEMENT ACQUIRERS BY RANKSeveral companies have taken advantage of the strong market conditions over the past five years to increase assets under management through global acquisitions. In Europe, Swiss firm Julius Baer Group Ltd has acquired 9 companies with total deal value of $1.3 billion. Of the top 15 acquirers of asset management companies, 6 of the companies were located in the United States, with The Carlyle Group LP acquiring 9 firms for $1.2 billion in total
transaction value. Overall, the top 15 global asset man-agement acquirers have completed 63 transactions for over $18 billion in total consideration over the past five years.
IV. MAJOR DEALS ANNOUNCED 2015-2016Fifteen transactions have been announced with a total transaction value greater than $1.0 billion for 2015-2016. These 15 transactions represent a total of more than $44 billion in consideration. Of these deals, 9 are pending completion, for a total transaction value of over $20 billion. This suggests that the lower trend in 1H 2016 could be reversed in 2H 2016, as deals are approved by regulatory authorities. The largest announced and completed transaction since 2015 is CPPIB Credit Investments Inc. $12 billion acquisition of Antares Capital, followed by Prologis, Inc. and Norges Bank Investment Management’s acquisition of KTR Capital Partners, LLC for $5.9 billion.
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Source: Standard & Poor’s
Chart IV: Global Asset Management Acquisitions Transaction Multiples 2011-2016
Mul
tiple
(x)
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10.5
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3.5
02011 2012 2013 2014 2015 2016 Full
Sample
Table III: Top Acquirers of Asset Management Companies 2011-2016
Source: Standard & Poor’s Limited to Global acquirers with at least $500m in total acquisitions.
Buyer Ticker Location Transactions Transaction Value
Julius Baer Group Ltd. SWX:BAER Switzerland 9 1,336The Carlyle Group LP NasdaqGS:CG United States 9 1,200Aberdeen Asset Management PLC LSE:ADN United Kingdom 7 1,455Legg Mason, Inc. NYSE:LM United States 4 1,351HarbourVest Partners, LLC United States 4 3,452Principal Financial Group Inc. NYSE:PFG United States 3 1,709TA Associates Management, L.P. United States 3 1,150Redefine Properties Limited JSE:RDF South Africa 3 1,101Canadian Imperial Bank of Commerce TSX:CM Canada 3 1,058Henderson Group plc LSE:HGG United Kingdom 3 984Piramal Enterprises Limited BSE:500302 India 3 804The Blackstone Group L.P. NYSE:BX United States 3 765IOOF Holdings Limited ASX:IFL Australia 3 654Schroders plc LSE:SDR United Kingdom 3 631Natixis Global Asset Management, S.A. Spain 3 625Totals 63 $18,275
Median EBITDA Multiple
Global Asset Management M&A Insight 2016Winchester Capital
V. CONCLUSIONS
Continued Momentum in the M&A MarketWe expect continuing M&A momentum in the asset management M&A market through Q4 2016 and 2017. As companies look to expand into new geographic regions and sectors, strategic acquisitions will continue to provide a fast and efficient means to grow AUM. We expect to see an increase in both strategic acquisitions and private equity acquisitions of asset management companies as PE firms utilize record amounts of dry powder (committed and uninvested capital).
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Table IV: Largest Announced Global Asset Management Transactions from 2015-2016
Source: Standard & Poor’s
Announcement M&A Target Buyers Total Transaction Date Closed Date Value ($m)
Jun-15 Aug-15 Antares Capital CPPIB Credit Investments Inc. 12,000
Apr-15 May-15 KTR Capital Partners, LLC Prologis, Inc.; 5,900 Norges Bank Investment Management
May-16 - American Capital, Ltd. Ares Capital Corporation 4,261
Sep-16 - American Realty Capital - American Realty Capital Advisors LLC; 1,448 Retail Centers of America, Inc. American Finance Trust, Inc.
Jul-15 May-16 Shanghai Pingpu Investment Co., Ltd. Ping An Life Insurance 1,359 Company of China, Ltd.
Feb-16 - BSI SA EFG International AG 1,329
Oct-15 Jun-16 Frank Russell Company TA Associates Management, L.P.; 1,150 Reverence Capital Partners LLC
Dec-15 May-16 American Century Nomura Holdings, Inc. 1,000 Investment Management Inc.
Total $44,398
ABOUT WINCHESTER CAPITAL Since 1986, Winchester Capital has focused on our four pillars: Integrity, Heritage, Insight and Perseverance. We offer professional advisory services and asset management with a record of transactions in 40 countries. In 2015, we received the Distinguished Award for Boutique Investment Banking Firm of the Year. We excel in direct transaction research, initiation and execution. If you are considering an acquisition or disposal transaction or you desire further research, please contact our Director of Corporate Communications, Ms. Pippa Smith at [email protected]. For further information on this research please visit winchestercapital.com or contact our Director of Global Research, Dr. David Bowen at [email protected].
This research is not offered as advice or guidance for investment purposes. This research contained herein has been compiled from publicly available sources at the time of publication and may be subject to change without notice.
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Fixed Income IncreasingFixed income mutual funds have seen positive net inflows of funds consistently over the past several months. Investors continue to look for less risky investments in current volatile market condi-tions. The greatest impact on performance of fixed income funds is potential interest rate increases. If the global central banks con-tinue to keep interest rates at record lows or moderately increase interest rates, the impact on fixed income AUM should be muted.
Emerging Markets Reversing TrendAs investors seek higher yields than traditional high yield bond funds provide, emerging market funds could see an increase in asset inflows. Emerging market funds have consistently outper-formed developed economies year-to-date, and companies such as BlackRock have recently invested heavily in the emerging markets.
With emerging markets such as China, India, and several African nations all producing economic growth greater than 6.5% in the second quarter of 2016, there is potential for continued strong per-formance.
ETF and Index Funds Increased FocusInvestment in ETF and index funds increase as investors focus on more stable returns and lower fees. There are now nearly 2,000 ex-change traded funds listed on the US stock exchanges, with nearly 160 launched in 2016 alone. Many larger active fund managers will look to acquire ETF and index fund issuers. In May 2016, Columbia Threadneedle Investments announced the acquisition of Emerging Global Advisors, and Hartford Funds acquired Lattice Strategies.
METHODOLOGYThis research examines both announced and completed global M&A activity in the asset management sector. Transactions are reported on both announcement and completion date as noted in each chart/table. Minority transactions of less than 20% are excluded, unless the transaction size is greater than $500m. Transaction data is sourced from Standard & Poor’s.
ABOUT THE AUTHOR DR. DAVID BOWEN Winchester Capital is pleased to announce the addition of David Bowen, Ph.D. to our team of transatlantic professionals. A native of Massachusetts, David is a cum laude graduate of Bryant University and achieved his Masters of Business Studies in Corporate Finance and Accounting from University College, Cork, (Ireland) where he also received his Doctorate in Finance. Dr. Bowen is a published author in The Journal of Trading and also The European Journal of Finance. Dr. Bowen’s previous career experience included positions at Brown Brothers Harriman & Co. and Bridgewater Associates.
