PwC: Manager M&A activity picks up in first quarter but traditional manager deals down

Disclosed merger and acquisition deal volume in the U.S. asset management and wealth management industry in the first quarter of 2017 reached $3.3 billion, up 4% from the previous quarter, shows an M&A report from PricewaterhouseCoopers.

The report says there were 41 announced deals in the first quarter, compared to 27 in the previous quarter.

Despite the overall increases, the report shows a slowdown in traditional asset management deals. It said there were five deals in the first three months of the year, down from 10 the previous quarter.

However, the report found an increase in overall deal activity in the alternative management subsector. During the first quarter, there were eight announced deals involving hedge funds or collateralized loan obligations managers, compared to one in the previous quarter. There were two private equity deals in the quarter, up from one the prior quarter.

The biggest deals of the quarter, according to the report, were Softbank's $3.3 billion acquisition of Fortress Investment Group; HNA Capital and RON Transatlantic Holdings' acquisition of a majority stake in SkyBridge Capital, and BlackRock (BLK)'s acquisition of First Reserve Energy Infrastructure Funds.

Samiye Yildirim, PwC's U.S. asset management M&A leader, said in an interview that the slowdown in traditional asset management activity is due to uncertainty about the Department of Labor fiduciary rule, how managers will be impacted by continuing fee pressure from investors and questions about when outflows from active strategies will stop.

Ms. Yildirim said a number of traditional asset managers “are dancing,” looking to make deals to get larger to better withstand industry trend that are putting pressure on revenue and profits. But the uncertainties are slowing down activity, she said.

Another issue, Ms. Yildirim said, that asset managers are trying to deal with is the culture of their organization and whether a merger would be a good fit on a personnel level.

“The industry is trying to find opportunities, but it has not turned in to real action,” she said.