Credit Suisse Asset Management LLC might be looking to snap up alternatives managers on the cheap, but it won't likely make any transformational acquisitions, analysts and industry observers say.
In announcing its second-quarter earnings last month, Credit Suisse Group AG CEO Brady Dougan said the company's strong capital position would enable it to shop for deals for money management and private banking firms.
But, the parent bank just raised its Tier 1 capital level — a key measure of a bank's financial strength — to 15.5% of total assets, and its executives won't rush to spend a lot of capital on money manager acquisitions that likely will incur goodwill expenses, analysts said. For CSAM, this market creates an opportunity for the Zurich-based manager to remake itself, after selling most of its traditional asset management business to Aberdeen Asset Management LLC for £297.6 million ($421 million). The deal closed on July 1.The problem with acquisitions at this time is two-fold, said David Williams, an analyst at Fox-Pitt Kelton Cochran Caronia Waller Ltd. in London.
“Generally, the things you buy will incur goodwill (and decrease Tier 1 capital). They will be reluctant to take that down,” Mr. Williams said. Also, CSAM would struggle to find the right fit, he said, suggesting that Asia might be the best location to look for both alternative money managers and private banks. “How many franchises are there that would be a good fit? Not many is the answer,” he said.
Although there might be bargains, those looking to buy must be “choosy” in today's environment, said Elizabeth Bloomer Nesvold, managing partner at M&A investment bank and consultant Silver Lane Advisors, New York. However, she said, “It's a good time to be aggressive in the alternatives space. Maybe those are dirty words to some right now ... but, when everything shakes out, the alts players that demonstrated strong survival skills and sustainable performance will be really well positioned for inflows."