After big TIAA-CREF-Nuveen deal, boom predicted in manager mergers

In the wake of TIAA-CREF's purchase of Nuveen Investments Inc., industry watchers say there is more to come.

“I think you'll see a 'boomlet' in mergers-and-acquisition activity over the next 12 months,” said Ben F. Phillips, partner at Casey Quirk & Associates, a consultancy that advises on asset management deals. “The pricing gap between bidders and askers has narrowed.”

In a deal that analysts said makes TIAA-CREF a more feasible competitor to top-tier mutual fund companies like The Vanguard Group Inc. and Fidelity Investments, the money manager said April 14 that it had agreed to acquire Nuveen for $6.25 billion from a group led by private equity firm Madison Dearborn Partners.

The acquisition is the largest transaction in the asset management business since 2009, when BlackRock Inc. acquired Barclays Global Investors and the iShares exchange-traded funds in a deal valued at $13.5 billion.

The Nuveen acquisition was not the only deal of the week. On April 16, Victory Capital Holdings Inc. said it had agreed to acquire Munder Capital Management in an all-cash deal, creating a firm with $37 billion in assets, including $16.5 billion in house-brand mutual funds. Funds managed by private equity firm Crestview Partners are among the investors financing the deal. Terms were not disclosed

Money manager mergers and acquisition activity in the first quarter was flat from the previous quarter — with total assets in transactions standing at $305.5 billion — but down more than 55% from the first quarter of 2013, according to Pensions & Investments' Research Center.

The 12 money management deals in the first quarter represented an increase from the previous quarter, when there were nine. In the first quarter of 2013, there were 26 transactions.

BMO Global Asset Management's purchase of F&C Asset Management PLC, which had about $136 billion in assets under management when the deal was announced, was the largest transaction in the quarter measured by AUM.

Also of note in the quarter was Standard Life Investments Ltd.'s purchase of Phoenix Group Holdings' Ignis Asset Management unit, which has around $98 billion in assets under management.

On March 28, Affiliated Managers Group Inc. announced the purchase of a majority stake in River Road Asset Management LLC and a minority stake in EIG Global Energy Partners LLC. Since 2008, P&I has reported 10 acquisitions by AMG of managers that oversaw around $100 billion. The current and historic deals focused on the listed equity and alternatives arenas.

“Today, where you're going to see more mergers-and-acquisition activity is in the alternatives field where the major players are seeking expertise in relatively unusual areas,” said Burton J. Greenwald, a fund consultant who works with Franklin Templeton Investments. “That's a special product area that's growing rapidly and requires a very narrow expertise.”

Mr. Phillips agreed that firms with strengths in alternatives are in high demand. He also said asset managers are seeking investment expertise in credit, global investments and multiasset allocation.

Trevor Hunnicutt writes for InvestmentNews, a sister publication of Pensions & Investments.