The completion of F&C’s £53.6m takeover of Thames River last week was not the first case of cannibalism among UK asset managers this year, and it is unlikely to be the last.
Analysts foresee more M&A – or at least the ‘A’ part of it – this year, and some allocators say a bout of consolidation will do the industry good.
Schroders bought 49% of RWC Partners in June, and Man Group’s offer of $1.6bn (£1.04bn) for Mayfair-headquartered, though US-listed rival GLG Partners was approved by shareholders last week.
Meanwhile, activist outfit Sherborne Investors has boosted its stake in F&C to 9.1%, though it is not certain this will end in M or A.
All the while, US hedge fund activists Greenlight Capital and Pershing also sit on F&C’s share register.
Commentators most often mention Gartmore as a target, amid rumours private equity house Hellman & Friedman, owner of 24% of its shares, is seeking a buyer.
At 118p last week, Gartmore’s shares were barely half the 220p float price of November.
Jupiter is one of the rumoured suitors along with Henderson, after CEO Andrew Formica signalled his firm was on the M&A warpath.
But Gartmore is not the only potential target. Larger houses could eye Liontrust as it rebuilds its offerings following the departure of managers Jeremy Lang and William Pattisson last year.
The key question for investors is, would asset management M&A be healthy for the industry? The answer on balance is ‘yes’.
Hargreaves Lansdown’s Ben Yearsley says there are too many funds on offer. The rationalisation of products after Henderson and New Star tied the knot in 2009 is the kind of trend, if done properly, he welcomes.
Critics may contend the swallowing of boutiques is negative. But those acquired have been largely left to their own devices by their larger parents. RWC, and soon Thames River, are arguably cases in point. M&A might also eject mediocrity from the industry, and put cash in the hands of superior stewards. However, the problem is potential M&A targets do not generally involve groups with managers one would describe as weak, or even just humdrum.
The disappearance of these firms as independent entities would do little to increase the overall standard of the UK asset management industry.
