Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Innovation Investing Conference
    • 2022 Defined Contribution East Conference
    • 2022 ESG Investing Conference
    • 2022 DC Investment Lineup Conference
    • 2022 Alternatives Investing Conference
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
August 06, 2012 01:00 AM

European banks hit wall on asset manager divestitures

Pace of deals lowest since 2008-'09 crisis

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Share
    Source: Company reports
    Among large banks expected to be affected by new regulations, UBS and Morgan Stanley have seen their assets under management climb 6.2% and 5.1%, respectively in the year ended June 30.
    Share
    Still to be seen is whether asset management divisions will contribute more to the top and bottom lines of these banks. In the most recent quarter, their average contribution to total revenue was 9.9%, and the median contribution to total net income was 8%.

    European money manager divestitures are running into such high hurdles that the number of deals is now at its lowest level since the 2008-2009 financial crisis.

    In the year ended June 30, only nine deals were announced, according to data from Sandler O'Neill & Partners LP, New York. In comparison, 18 were announced during the year earlier period, and 25 in previous years.

    European banks — which need to raise capital and meet regulatory demands — are among the most likely to sell non-core assets including their money management businesses. However two stumbling blocks exist: “the quality of businesses; and, as a result, the valuation expectations vs. the market reality,” said Aaron Dorr, New York-based managing director and head of asset management investment banking at Sandler O'Neill.

    With less willing buyers around, sources said, more banks might begin to consider selling their asset management businesses in pieces, rather than a package deal.

    Potential sellers are “waiting for a nice deal to see what a successful transaction might fetch,” said Benjamin F. Phillips, partner at money manager consultant Casey, Quirk & Associates LLC, Darien, Conn. “Whatever the result, it will either unlock or freeze future deals.”

    Two prominent deals could be announced in a matter of weeks, according to sources familiar with the transactions. Private equity manager Carlyle Group is negotiating to buy TCW Group Inc. from Societe Generale Group. And Beijing-based private equity companies Hony Capital Co. Ltd. and GCS Capital are in final talks to acquire Dexia Asset Management, which is owned by Dexia SA and had to be sold as part of the conditions of a Franco-Belgiangovernment bailout.

    One source warned: “I wouldn't bet on (either deal) just yet.”

    Rabobank — the owner of Robeco Group, a fund manager with about $226 billion in assets under management — also has been shopping for a buyer.

    “Absolutely there's been an expectation that more banks will need to sell (their asset management businesses) to bolster capital,” said Baber Din, director in the investment management M&A team at Deloitte LLP, London. But “so far, practically none of the big ones have completed.”

    Bite-size pieces

    Divestitures may be more easily done in bite-size pieces, which would attract a larger pool of potential bidders, sources said.

    Sean Healey, chairman and CEO at Boston-based Affiliated Managers Group Inc., said his company is actively searching for acquisition opportunities in Europe. However, he's not after the consolidated bank-owned managers, but rather the specialist teams within them — particularly in alternatives such as hedge funds and private equity. “We're looking for the hidden gems,” he said in an interview.

    “It's all about risk,” Mr. Dorr said, “whether it's an individual or a corporate entity, (buyers) are worried about the decision they make today and its impact over the next one or two years. This is reflected in the pricing and the structuring of the transaction. They're much more comfortable writing a check for $200 million compared to $1 billion.”

    Credit Suisse Group, for example, is seeking buyers for two U.S.-based private equity businesses — a customized fund investment unit that has raised about $25 billion and a secondary fund division that has raised about $11 billion.

    Bank-owned stakes in hedge funds are also potentially attractive, sources said. However, many hedge funds “are coming off a bad 2011, which wasn't a banner year,” said Jonathan Little, partner at Northill Capital LLP, London, which invests in specialist managers. “They might wait until next year, when they're performing better to get a better price.”

    Although market conditions remain difficult, a sustained resolution of the eurozone crisis could lead to “a big equity rally next year,” Mr. Little added. Therefore some sellers are asking, “Do I really want to sell now? And the answer is no.”

    “Bolt-on” deals — involving buyers looking for “specific capabilities that are highly differentiated” — are expected to become more prevalent globally, Casey Quirk's Mr. Phillips said.

    “This is a longer-term trend; 100% acquisitions have definitely been on the wane,” he added. “The issue is not that there is a lack of buyers, but that there's a lack of quality sellers.”

    Asset managers are seeking geographic or product diversification globally, driving demand for specialist capabilities, said Shaun McNamee, London-based partner at PricewaterhouseCoopers LLP's financial transactions services division.

    However, buyers are much more focused on vendor due diligence in the current environment.

    “The level of market uncertainty means that vendors need to really demonstrate the value of the businesses they're selling,” Mr. McNamee said.

    'Difficult to disentangle'

    In some cases, bank-owned firms are also “more difficult to disentangle,” Mr. Little said.

    Earlier this year, Deutsche Bank's attempt to sell its asset management business failed following “a very public and hurried process,” according to a second-quarter asset manager transaction review published by Sandler O'Neill. “The early announcement of a winner for the entire business was cut back to the sale of one affiliate, RREEF, before the entire negotiation was terminated.”

    Trying to sell any large money managers in this environment will be difficult, Mr. Phillips said. “They're big and complicated. Many have relied on a distribution channel that is no longer really there.”

    In addition, the number of natural buyers in Europe has dwindled. “European trade buyers are not looking to do any transformational or logistically complex deals right now,” Mr. Din of Deloitte said.

    However, both Asian and North American buyers increasingly are competing to acquire European asset managers. “This is part of the general interest in financial services from Asia,” Mr. Din said.

    “With a rising middle class in China, asset management capability is very attractive. In addition, (both U.S. and Chinese buyers) are probably finding that it's a relatively good time to be doing an economic transaction in asset management if it makes strategic sense.”

    Related Articles
    European banks needing cash might sell managers
    Dexia AM sale won't be a slam-dunk
    Deutsche Bank, Guggenheim end RREEF talks without a deal
    Carlyle deal for TCW imminent
    Rabobank may succeed at getting one buyer for all investment units
    PwC: Brazil, China, India primed for money manager M&A, expansion
    Sandler O'Neill: 29 large-manager M&As in 3rd quarter
    European money manager divestments still a hard sell
    GCS Capital in exclusive talks to buy Dexia Asset Management
    Dexia agrees to sale of asset management unit to GCS Capital
    Societe Generale's global investment management leader steps down
    Blackstone buying Credit Suisse's private equity secondaries unit
    Banking on asset management?
    Recommended for You
    money management 1550_i.jpg
    Managers cut costs as they face headwinds to AUM, revenue – Casey Quirk
    Arezu Moghadam
    J.P. Morgan Asset Management names global head of data science
    Allianz HQ
    AllianzGI's unprecedented fall ends with U.S. ban
    Alternatives: Investing Across the Spectrum
    Sponsored Content: Alternatives: Investing Across the Spectrum

    Reader Poll

    May 23, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Crossroads: Politics, Inflation, & Bonds
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Q2 2022 Credit Outlook: Carry On
    Leverage does not equal risk
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    May 23, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Innovation Investing Conference
      • 2022 Defined Contribution East Conference
      • 2022 ESG Investing Conference
      • 2022 DC Investment Lineup Conference
      • 2022 Alternatives Investing Conference