State Street struck a deal with Brown Brothers Harriman to acquire BBH Investor Services for $3.5 billion in cash.
The deal, targeted to close by the end of the year, will add more custody, accounting, fund administration, global markets and technology to State Street's asset servicing business.
As of June 30, BBH had $5.4 trillion in assets under custody while State Street had $31.9 trillion in as of the same date.
State Street said in the release that estimated cost synergies of $260 million will be realized in the third year after the acquisition from efficiencies in operational systems and infrastructure as well as from overhead consolidation.
"The acquisition is expected to advance State Street's strategy as an enterprise outsource solutions provider by creating the No. 1 asset servicer globally, strengthening competitive positioning, expanding geographic coverage and enhancing (the) client experience," said State Street in a news release Tuesday.
BBH employees will join State Street after the deal has closed and the business' senior management team will transition to similar roles at State Street.
The bank does not "anticipate headcount reductions as a result of this announcement in the short term. One of the most attractive things about this deal is the addition of incredible talent to our team," said State Street spokesman Brendan Paul in an email.
He added that "upon closing, we will begin the process of identifying and integrating the best of both companies."
Among the advantages to State Street, the release said BBH Investor Services will add innovative data connectivity tools and a platform that facilitates data transmission and integration between buy-side and sell-side systems to the bank's current systems.
The acquisition also will further the bank's goal of expanding its asset servicing presence in non-U.S. markets, the release said..
BBH Investor Services has asset servicing clients in 90 geographic markets and its client base breakdown is 43% in Europe, the Middle East and Africa; 29% in the Americas and 28% in Asia-Pacific, according to State Street's investor presentation materials.
"We are enhancing our leadership position across a range of services, augmenting our position in a number of key markets, growing relationships with many of the leading global asset managers and owners and increasing our capabilities and scale," said Ronald P. O'Hanley, State Street's chairman and CEO, in the release.
"BBH Investor Services brings us strong talent, including industry leading service excellence and quality execution," Mr. O'Hanley said.
"We made this decision after careful consideration of the current and future landscape of the global securities servicing industry, including how best to support our and innovate for the growing breadth and complexity of our clients' servicing requirements. State Street is the ideal partner," said William B. Tyree, managing partner of Brown Brothers Harriman, in the State Street release.
