State Street announced Wednesday that it will terminate its proposed acquisition of Brown Brothers Harriman Investor Services, citing regulatory issues that would delay consummation of the deal.
Both parties mutually agreed to end the deal, said a news release from State Street.
State Street announced in September 2021 that it would pay $3.5 billion in cash for the BBH unit, which would have been the largest consolidation for the global custody asset servicing business in more than a decade.
Among the advantages to State Street, said a 2021 news release, was that BBH Investor Services would 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 would further the bank’s goal of expanding its asset servicing presence in non-U.S. markets, the 2021 news release said.
Regarding the broken deal, State Street in the Wednesday news release said that “after consideration of both regulatory feedback and potential transaction modifications to address that feedback, State Street has determined that the regulatory path forward would involve further delays and all necessary approvals have not been resolved.”
The firm added that the proposed modified transaction structure was “increasingly complex, presented additional operational risk to State Street and would limit the anticipated transaction benefits relative to original expectations. It would also include delays in the timing and potential limits to the amount of deal synergies.”
Ronald P. O’Hanley, Boston-based chairman and CEO of State Street, was not available for an interview, but he said in the company’s release that “from the beginning of our discussions with BBH in 2021, I have been impressed by the quality of the BBH Investor Services business and its people. The decision not to proceed with this transaction was not taken lightly and is in no way a reflection on the quality of the BBH franchise.”
Brown Brothers Harriman & Co., New York, expressed disappointment that the deal with State Street would not go through and confirmed that the company agreed with State Street about the canceling the acquisition, in a separate news release Wednesday.
“It is disappointing that State Street’s inability to secure regulatory approval precluded the compelling vision that they brought to us,” said Williams B. Tyree, BBH’s managing partner, in the BBH news release.
He noted that “BBH does not plan to sell the investor services business or to pursue another transaction.”
As of Sept. 30, State Street had $35.7 trillion in assets under custody and/or administration and $3.3 trillion in assets under management.
A spokeswoman for BBH did not immediately respond to a request seeking how much BBH Investor Services had in assets under custody as of Sept. 30.