2 minute read 20 Nov 2018
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Wealth and asset managers press pause on M&A

By

Nadine Mirchandani

EY Global Wealth & Asset Management Transactions Leader, EY Americas Financial Services Transactions Leader

Over 20 years of experience in leading financial services, corporate and private equity transactions. Advisor to both sell- and buy-side.

2 minute read 20 Nov 2018

Executives are focusing on portfolio reviews and integrating the assets they have acquired in the past year.

This article is part of our M&A report Global Capital Confidence Barometer, 2nd half 2018.

The active start wealth and asset management (WAM) companies had in the first quarter of 2018 has tapered off somewhat as some companies pause amid regulatory and geopolitical uncertainty. Thirty-eight percent of WAM respondents in this edition of our 19th Global Capital Confidence Barometer indicate that they expect to pursue M&A in the coming year, down from 51% six months ago and well below a record-setting 69% 18 months ago.

M&A expectations

38%

of wealth and asset management respondents expect to pursue M&A in the coming year.

Talent and new market entry become key M&A imperatives

Despite a generally positive outlook toward capital markets and improved valuations, regulatory, geopolitical and policy uncertainty are drawing concern: 39% of WAM executives say it’s the biggest risk to business growth, while 44% see these factors as the predominant risk to dealmaking in the next 12 months. For WAM companies that are looking to acquire, talent and access to new markets are key imperatives.

One-third of WAM companies are taking a continual look at their portfolios

As a host of technological, fiscal and structural changes transform the industry, WAM companies have increased the frequency of their portfolio reviews. Eighty-two percent now review their portfolios at least every six months, with a third reviewing their portfolios continually. Based on their most recent portfolio reviews, 66% have identified assets either at risk of disruption or that are underperforming to divest.

Portfolio review frequency

82%

of wealth and asset management respondents review their portfolios at least every six months.

Preparing earlier for post-deal integration

WAM companies are focusing on integrating the assets they have acquired in the past year, and so are taking a temporary step back from M&A. While nearly half have yet to complete the integration process, of those who have, 25% say they have achieved lower synergies than they had identified. Learning valuable lessons from these transactions, 45% of WAM executives are signaling that they will likely prepare for post-deal integration earlier in the deal life cycle, while 21% say they will place greater attention on how they select integration leaders.

WAM executives expect private equity to step in as a dominant player in M&A in the year ahead

Fifty-seven percent of WAM executives expect the M&A market to improve in the year ahead, with 39% of respondents expecting private equity to be an increasing presence in the market, while 42% expect private equity firms to be their primary competition. While WAM players press pause, private capital players are returning to the M&A market with significant purchasing power as they look to invest more for the medium and long term.

Summary

While wealth and asset management players press pause, private capital players are returning to the M&A market with significant purchasing power as they look to invest more for the medium and long term. Download the full report (pdf).

About this article

By

Nadine Mirchandani

EY Global Wealth & Asset Management Transactions Leader, EY Americas Financial Services Transactions Leader

Over 20 years of experience in leading financial services, corporate and private equity transactions. Advisor to both sell- and buy-side.