- June 1, 2019: Vol. 6, Number 6

The next wave of M&A: Consolidation of the asset management business is redefining industry landscape

by Sean McKee and Brian Seidler

In the wake of the recent market volatility and headwinds facing many of the world’s largest asset managers, we expect a tectonic shift in the industry landscape over the next 12 to 24 months, driven by an increasing number of megadeals and large-scale consolidation plays.

Robust financial markets have been kind to asset managers in recent years, helping to prop-up assets under management (AUM) and profits at many of the world’s largest money management firms. At the same time, strong market conditions have helped mask some deteriorating fundamentals, including, for example, mutual fund net-outflows, which have accelerated in recent months.

We expect more firms will seek out marriages that will catapult them into the $1 trillion-plus AUM club, and the “winners” in the coming year will be those that can leverage their size and scale to create value through merger and acquisition (M&A) transactions.


Global asset management M&A activity climbed 20 percent in 2018, with a record-level 253 transactions announced, up from 210 deals in the prior year. While there were very few large-scale transformational deals, we saw a surge in deals involving alternative asset managers (39 percent year-over-year growth), coupled with a healthy level of tactical deal making involving smaller and midsize managers. More recently, in the fourth quarter of 2018, Invesco’s announced $5.7 billion acquisition of Oppenheimer from MassMutual may have set the ball rolling when it comes to large, billion-dollar-plus money manager tie-ups.

Not long thereafter, Victory Capital agreed to acquire USAA’s asset management arm in a bid to diversify its asset base, increase scale, and enhance its investment capabilities in a transaction valued at up to $1 billion.


We think the current environment is ripe for large-scale M&A activity among asset managers. Many are facing increased financial pressures amid the recent market turbulence, exacerbated by pervasive industry trends, including:

  • Product barbelling, which is driving the majority of asset flow to passive and alternative strategies.
  • Continued fee pressure, especially cost cutting within mutual funds and ETFs, as fees race lower.
  • Rising industrywide costs due to regulation and continued investments in technology and data analytics.
  • The largest managers keep getting bigger, with 19 of them now managing more than $1 trillion and the concentration of assets managed by the 20 largest managers reaching the highest level in years (now 43 percent of the top 500 managers’ total AUM).

Against this backdrop, we believe now is the time for asset management executives to evaluate M&A as a strategic growth lever that could:

  • Deliver great scale in core offerings
  • Diversify product lines and fill strategy gaps
  • Expand the client base and geographic footprint
  • Enhance distribution channels and asset-gathering efforts
  • Create operational efficiencies and cost takeout opportunities

Looking ahead, we expect to see an uptick in deals involving independent pure-play managers, renewed divestiture activity among banks and insurers, and an increase in cross-border transactions.


In order to de-risk the deal and help maximize the potential for value creation, successful acquirers conduct a rigorous evaluation of the foundational aspects of the target’s business. Due diligence generally includes a thorough assessment of the quality of the investment team and process, client base, distribution relationships, earnings power, and operations platform. Equally important are the people aspects, including evaluating the cultural compatibility of the two firms and incentives used to attract and retain top talent.

While failure to get these fundamentals right can be catastrophic to any deal, in today’s ultracompetitive M&A environment, firms are increasingly willing to stretch on price in order to win strategic assets. To justify a higher valuation — and one that can still deliver accretive value to the combined platform — successful acquirers will have well-developed expectations regarding post-deal cost synergies and revenue-enhancing opportunities. Getting to that point requires detailed, ground-up synergy-capture analysis during the diligence phase focused on:

  • Consolidating sales and marketing teams, as well as corporate and business support functions
  • Accessing a broader client base and cross-sell opportunities
  • Leveraging each firm’s distribution networks
  • Capitalizing on the expanded and more diversified product set that offers opportunities through different market cycles
  • Leveraging investments in IT and operations across a broader asset base

Executing on these synergy initiatives is absolutely paramount and will ultimately make or break the transaction. A disciplined process will help buyers to deliver on synergy capture — and fast. Demonstrating some “quick wins” early in the integration process will help validate the deal’s value proposition. Early successes will also help build momentum as buyers work to achieve their vision of a stronger, more diversified firm with the scale to better serve clients in a highly competitive industry.


With big consolidation on the horizon, larger players emerging, some longstanding names leaving the scene, and global players gaining new strength, firms will need to strategically evaluate the M&A opportunity and realize the benefits in order to secure their place in the rapidly evolving asset management industry.


Sean McKee is national sector leader for public investment management at KPMG, and Brian Seidler is managing director of deal advisory for the firm. To download a PDF of the original report, go to this link:

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