Improved valuations, increased risk appetites and renewed strategic ambitions have driven global merger and acquisition activity in the past several months, said a new report from Moody's Investors Service.
This growing M&A optimism is finding its way into the money management industry, the report said, citing Man Group's recently announced intention to buy Numeric Holdings, TIAA-CREF's $6.25 billion acquisition of Nuveen Investments in April and Standard Life Investment's purchase of Ignis Asset Management in March.
“In speaking with (money management) companies in our coverage, confidence is growing and we expect that confidence to lead to more M&A activity,” said Robert M. Callagy, vice president, senior analyst at Moody's and co-author of the report, in a phone interview.
“Over the next 12 months, there will likely be a significant increase in deal volumes, which have been slow to recover since the global financial crisis as the market is replete with motivated buyers and sellers,” the report said.
Due to improving macroeconomic factors, larger money managers are motivated to buy as a means to increase their assets under management to gain scale and broaden diversification; or enhance their investment and distribution capabilities; or fill gaps in their business by expanding into new channels or product types.
Sellers, meanwhile, are likely to act now because business fundamentals have improved in the past several years and valuations also are higher.
“Growth from investor flows continues to be a challenge so we see M&A as a way for money managers to improve their capabilities,” Mr. Callagy added.