M&A Musings: Robust outlook for Wealth and Asset Management
M&A activity in the Wealth and Asset Management (WAM) sector looks to be on track to equal or better the strong performance we saw in 2018. According to EY analysis of global WAM deal data in the first half of 2019, there were 201 deals with a total disclosed deal value of US$14.5b, up slightly vs. the same period last year. Geographically, M&A activity increased across every region, except for Asia-Pacific, where disclosed deal value fell a little compared with last year.
Transformational investments in digital and technology
This robust set of M&A data is consistent with the findings of our most recent Global Capital Confidence Barometer*, where more than half of WAM executives surveyed say they’ll pursue M&A in the next 12 months as part of a multifaceted growth strategy. For nearly a quarter (23%) of WAM executives, sector convergence lies at the heart of deal rationale. In an effort to offset pressure on fees, WAM firms are looking to gain scale through consolidation.
Virtually all the executives surveyed say they’ll be making significant investments in technology in the coming year, spread across a range of front- and back-office activities.
Transact to transform
For several years, traditional deal strategies have centered on bottom-line synergies and technology to create value. Looking ahead, however, WAM executives are signaling that they may be shifting their focus from operational efficiencies to market expansion and top-line synergies such as gaining access to differentiated customers. As a result, we expect WAM companies to be pursuing deals that open new routes to growth.
Portfolio reshaping is another area getting a lot of attention. A robust and structured approach to capital allocation will better position WAM companies to capture value in the current disruption-led environment.
In the short term, however, innovation, the impact of digital technology and geopolitical uncertainty will be top of mind as WAM companies continue to transform to compete.
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?The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organization or its member firms.
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*The EY Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.