Asia-based bidders have emerged as the last men standing in two auctions of big European money management firms in recent months, a pattern market watchers say is likely to become more pronounced as Asia's relatively strong economic growth continues.
On Dec. 13, GCS Capital, a Hong Kong-based private equity firm, announced it had reached an agreement with Dexia SA to buy Dexia Asset Management, the Belgian bank's Brussels-based money management arm with more than $104 billion in assets under management and 550 employees worldwide.
Meanwhile, investment bankers say Tokyo-based ORIX Corp. and Sydney-based Macquarie Group Ltd. are the remaining bidders in a long-running auction for Rabo-bank's Robeco Group money management arm.
Some bankers see a pattern.
The bidders are betting they can use their connections with investors and financial institutions in Asia to turn money management firms with established businesses in Europe and the U.S. into global franchises, noted one Hong Kong-based investment banker, who declined to be named.
That idea appeared to be central to the strategic plan at GCS Capital, launched in 2010 by a handful of market veterans who had worked together at the Hongkong and Shanghai Banking Corp. Ltd.
In a Dec. 4 news release announcing a stage of exclusive negotiations with Dexia, GCS Capital cited its backing by “premier institutions from the fastest growing regions in the world” as a key to its longer-term goal of presenting “premier European and Australian fund products to Asian and Middle Eastern investors ... (and) innovative products from Asia and the Middle East to existing and new clients of the group in all geographies.”
In its subsequent announcement of a sales agreement, GCS reported it had signed “a strategic partnership agreement with Industrial and Commercial Bank of China Ltd., China's largest banking group,” that will provide Dexia with both distribution muscle and valuable market intelligence in Asia, while noting “additional discussions with other major financial institutions” in the region.
Bankers cite a number of reasons Asian firms appear to be sporting a higher profile in global money management M&A deals this year.
First and foremost, tough economic and regulatory environments have pushed traditional U.S. and European buyers of money management firms — banks, insurance companies and wirehouses — to the sidelines, even as relatively strong growth in Asia has left local players cash rich in a mostly capital-starved world, noted Karamvir Gosal, a New York-based investment banking veteran who launched boutique advisory firm Valores Capital Partners last month with offices in New York and Mumbai, India.
The yen's strength, meanwhile, has bolstered the acquisitive appetite of Japanese buyers, Mr. Gosal noted.
Aaron H. Dorr, New York-based managing director and head of asset management investment banking at Sandler O'Neill & Partners LP, cites a “confluence of two factors”: who has the money and which regions have less fully developed money management businesses that can offer the greatest growth prospects.
In an environment where potential U.S. bidders would likely already have substantial European operations and European buyers would have less incentive to double down at home, that has left Asian firms as the “de facto buyers” of large European platforms on the block, Mr. Dorr said.
