- Posted May 28, 2014 by
London, United Kingdom
Successful and unsuccessful mergers in the asset management business
Among the mergers & acquisitions in France, some were between two small or average sized companies with the intention to reach a critical volume of assets; others were involving big players who decided to acquire smaller asset management firms in order to add a specialization to their skillset.
Today we can have a little perspective on the results of these movements. So here are some learnings from the main French mergers in the asset management sector. It is highly recommended for investors to read the following cases for inspiration.
Acquiring Complementary Skillsets Does Help
In September 2011, Natixis Global Asset Management (abbreviated NGAM), the leading European Asset Manager holding an asset totaled $773 billion (€533 billion) as of 30 June 2011, announced its acquisition of a controlling interest from Darius Capital Partners, an investment advisory and research firm that provided customized hedge fund solutions.
The acquisition was made by NGAM with the intention to go beyond present financial services and further expand the alternative range. The success of this acquisition lies in NGAM’s multi-boutique model, which enables Darius Capital Partners to remain independent in its solution design and investment approach, making it possible to integrate complementary skillsets while maintaining the value and excellence of the team.
Balanced Client Portfolio Paies Off
In January 2013, Financière de l’Echiquier, a France-based investment company holding an asset of 5 billion euros as of 30 Jan 2013, announced its acquisition of Acropole Asset Management, a company that is exclusively specialized in convertible bonds.
In January 2013, the bond funds held by Financière de l’Echiquier represented only 5.64% of its total assets, which was considered a limit of opportunity by the manangement. The acquisition of Acropole Asset Management enabled Financière de l’Echiquier to capture a healthy investment structure and strengthen its presence with institutional clients. Today the bond funds represent 10.82% of its total asset. The percentage of institutional clients also reaches 41.01%.
Big size may go with high risk.
In July 2001, BNP Paribas Asset Investment (BNP PAM), the Europe-based leading asset management company, announced the merging operation with Fauchier Partners into BNP Paribas Fauchier Partners (BNP FP). BNP PAM acquired a 50% economic interest in the enlarged Fauchier Partners in consideration for contributing its shareholding in BNP FP and making additional cash payments. Majority voting rights remained with management.
The giant joint-venture was supposed to be a win-win operation for both companies. Fauchier demonstrated its commitment in the field of alternative asset management while BNP PAM Partners benefited from the distribution capacity. However, after several years of success, BNP lost sight of what made the success of Fauchier: upscale products and a very specific type of clients. The processes of the big firm took over after some time and reduced the value of the Fauchier very specific offer. With no help from the 2008 crisis, the company started losing clients and assets and BNP FP had no other choice than to sell Fauchier Partners to Legg Mason and Permal in December 2012.
Synergy creation is key
In May 2012, Rothschild & Cie and HDF Group announced their merger on traditional and alternative multi-management activities. The new company was named Rothschild HDF Investment Solutions, 67% controlled by Rothschild & Cie and 33% controlled by HDF Finance.
The new company, controlled by Rothschild & Cie was expected to create synergies between two organizations and offer holistic and innovating investment solutions beyond traditional investment types. However, the financial results of the new firm were not as good as expected and let the experts fear a situation comparable to that of BNP FP at the end of the story. Indeed, Rothschild, once they acquired HDF Finance, seemed to forget the special features that made the success of the small asset management company: thorough research process, top quality products and high end clients. So far, most of the clients seem to be staying put but if the offer keeps being downgraded to match Rothschild’s wide-market vision, this acquisition could turn into a massive disappointment.
All in all, mergers are inevitable in a reclining market but finding the right fit between two asset management companies is far from a safe bet. NGAM has a long history of having it right and most of their acquisitions are deemed successful. Mostly because they often manage to keep the know-how of the companies they acquire and make them thrive. However, other big firms, such as BNP PAM have lacked the luck or the perspicacity to make it work and destroyed the value of what the companies they bought. Rothschild & Cie seems to be heading the same way.