1999 marked more than the end of a century -- it was also likely the high-water mark for cross-border mutual fund company mergers, according to new research from Cerulli Associates Inc., Boston.
A record 26 joint venture deals were struck last year, mostly trans-Pacific or trans-Asiatic alliances; 5% targeted Africa. Eight deals targeted Japan and five, South Korea. Only one involved Europe.
But despite the popularity of joint ventures over the past 20 years as a quick way of generating cross-border revenues, Cerulli's long-term analysis of the 150 fund management joint ventures struck since 1979 showed a distinct pattern of failure. While the first cross-border deal -- Rowe Price-Fleming International, a 50-50 deal between U.S. manager T. Rowe Price Inc. and U.K. manager Robert Fleming Holdings -- proved successful, many marriages of convenience have failed.
At the end of 1999, Cerulli's consultants found that as many as 37% of the universe of 150 joint ventures announced since 1979 had failed or were suspected of being defunct.
In a narrower breakdown of the lifespan of joint ventures, Cerulli found that nearly half of those announced before year-end 1997 were already dead. Only 25% of the cross-border joint ventures announced five years ago or earlier are still in business today. Cerulli consultants noted that the failure rates of cross-border alliances also include a few instances where the joint venture was sold to a third party.
