M&A in Investment Management
The Investment management sector is seeing an increasing trend in transaction activity, driven by a range of factors which include: a drive for scale and synergies; building distribution capability; entering new geographic markets or; expanding into higher margin asset classes.
Parties interested in buying have generally been corporates seeking strategic acquisitions, but have also included private equity funds. Sellers range from banks divesting themselves of non-core activities to raise capital, to private entities seeking partial exits in combination with a larger organisation that can take their business forward. This activity is against a backdrop of greater regulation, increasing margin pressure and shifting distribution and operating models.
Executing an effective deal
Executing an effective deal involves a significant number of challenges. These range from valuation issues on the quality and nature of assets under management, investment performance, distribution capabilities and client concentrations, to the human capital matters which are critical to asset management businesses; how do you retain and incentivise the fund management talent, whilst keeping them aligned with long term corporate targets, within the enlarged group in the future?
Taxation and regulatory capital structuring are essential work -streams on any transaction, and deals increasingly see innovative and complex sale and purchase agreements with detailed deferred consideration mechanisms based on future earnings or assets under management, affording buyers downside protection. Finally, life after completing the deal is as important to its ultimate success – careful post-merger integration planning and implementation is fundamental to achieving the synergies promised, building a strategically aligned business and thus delivering a return on the investment made.
How can Deloitte help?
At Deloitte, we have a breadth of specialist, sector-focused knowledge across all the areas where you may need assistance in doing the right deal:
- Financial due diligence (acquisition diligence, vendor diligence and support, Class 1 reporting accountant experience)
- Taxation and regulatory structuring
- Human capital (share options, bonus schemes, pension arrangements)
- Operational diligence
- Sale and Purchase Agreement (net asset completion adjustments, locked box, deferred consideration mechanisms)
- Post-merger integration
- Valuation and business modelling
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