The investment consulting industry has always experienced M&A activity. But a couple of factors, including a growing need for scale and industry leaders looking to retire and cash out, has led to a recent mini-boom in consolidation activity in the past five months.
In October, Verus Advisory Inc. and Strategic Investment Solutions Inc. announced they were planning to merge. The merger is expected to be completed by Jan. 1, with the combined firm holding more than $380 billion in assets under advisement under the Verus name.
The same week, Westwood, Mass.-based Meketa Investment Group Inc. announced it would absorb most of the staff and founder Ted L. Disabato of Chicago-based Disabato Advisers LLC, effective Nov. 1.
Also in October, Boston-based TA Associates announced its intention to buy Russell Investments' money management and consulting businesses for $1.15 billion from the London Stock Exchange Group PLC, with Reverence Capital Partners LLC buying a “significant minority stake.”
And in June, Willis Group Holdings PLC and Towers Watson & Co. agreed to merge, creating a firm with a combined market value of $18 billion.
The transaction originally was expected to close by Dec. 31, with the newly combined advisory and insurance company to be named Willis Towers Watson PLC. But facing opposition from some shareholders and proxy-voting advisory firms that contended the proposed merger price is inadequate for Towers Watson, the consulting firm delayed a special shareholders meeting twice; it now is scheduled for Dec. 11.
Investment consultants with whom Pensions & Investments spoke said this rise in recent M&A activity is partly driven by the need for scale, but also partly driven by boutique firms formed by executives looking to retire and seeing selling their shop as a means of keeping the doors open.
Tim Barron, chief investment officer of Segal Rogerscasey, Darien, Conn., cited the need for growth as one driving factor for the “uptick in consolidation” in the industry. But he also added “a maturing population” was another driver for the activity.
“For some of the senior people who started their own consulting businesses 30 years ago, retirement is now something they're starting to think about, which means now's the good time to sell their business,” Mr. Barron said. “So, you've got a lot of baby boomers thinking about ways they can turn their sweat equity into cash.”
Janet Becker-Wold, senior vice president and the manager of Callan Associates Inc.'s Denver fund sponsor consulting office, also noted there are “a lot of baby boomers having started and grown these firms and now face the issue of transferring ownership” because they're getting ready to retire.
“If they haven't yet transitioned that equity ownership, they have to sell,” Ms. Becker-Wold said.
