"This is a consolidation play. It's safe to say that State Street will be the largest custodian following the deal, slightly edging out BNY Mellon," said Rajiv Bhatia, equity research analyst at Morningstar Inc., Chicago.
"We believe the deal makes sense strategically and we don't believe the valuation is rich. Strategically, there are few independent custodians left to consolidate and Brown Brothers Harriman's $5.4 trillion in assets under custody is sizable. Given the fixed-cost structure of custody operations, we believe expense synergies are likely to be realized," Mr. Bhatia said in a Sept. 7 research report.
Regarding BBH Investor Services' role within State Street, the firm will add new, innovative data connectivity tools and a platform — Infomediary — that facilitates data transmission and integration among buy-side and sell-side systems to State Street's current systems, said a State Street investor report provided to Pensions & Investments.
Infomediary also will enhance and accelerate development of State Street Alpha, the bank's front-to-back investment management platform that provides a streamlined source of data throughout the investment process, the report said.
Infomediary also will play a role in other State Street units and product lines, including its Charles River Development asset-servicing business, Mr. Maiuri said. Charles River's software platform focuses on services such as trading.
"There's a mad rush right now for more and better data integration," said an industry source who knows State Street well and asked not to be named.
"Alpha is State Street's ... front-middle-back end enterprise platform and the fluidity of data is critical to its function. The Alpha platform will benefit greatly from the data aggregation Infomediary will provide to Alpha users," the source said.
The acquisition also will further the bank's goal of expanding its asset-servicing presence in non-U.S. markets, Mr. Maiuri said.
BBH Investor Services has clients in 90 markets. Its client breakdown is 43% in Europe, the Middle East and Africa; 29% in the Americas and 28% in Asia-Pacific, according to a State Street presentation.
State Street spokesman Brendan Paul said the firm doesn't have comparable geographic data about its asset-servicing client base.
State Street estimated that 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, its news release said.
BBH employees will join State Street after the deal has closed and the senior management team will transition to similar roles at State Street, Mr. Paul said in an email.
As additive as the data enhancements BBH Investors Services will bring to State Street's asset-servicing capabilities will be, Mr. Maiuri said "in a consolidation deal, you usually don't keep all the people (that come from the acquired company), but in this case, the most important part of the deal is the BBH people who will join State Street. The people are what make the company grow."