Macroeconomic uncertainty in the near term and market volatility continued to sap dealmaking appetite in the US asset management sector in the second quarter.
Only 67 US asset management M&A deal announcements were made year to date through June 1, compared to 83 deals in the same period of 2022. There were 36 deals announced in the three months ended March 31, down from 41 deals in the 2022 first quarter and 39 in the corresponding period of 2021, according to S&P Global Market Intelligence data.
Year-to-date deal volume was still higher than the lows of the COVID-19 pandemic era, when 52 deals were announced in the first two quarters of 2020.
Largest in 12 months
The largest US asset management M&A announcement between June 1, 2022, and June 1, 2023 — in terms of the target's AUM — was San Mateo-based Franklin Resources Inc.'s $1.30 billion deal to acquire Boston-based asset manager Putnam Investments LLC from Canada-based insurer Great-West Lifeco Inc. The deal was at the center of the long-term partnership forged between Franklin Resources, operating as Franklin Templeton, and Canada-based Power Financial Corp., the parent company of Great-West Lifeco.
At announcement May 31, the target's AUM was $136 billion while that of Franklin Resources was $1.42 trillion. The deal accounted for the majority of the $219.65 billion year-to-date total target AUM through June 1, compared to a total of $197.80 billion in the first six months of 2022.
Franklin Resources, which has successfully completed several acquisitions of alternative asset management firms since 2022, expects "general strategic activity in the industry" to be "strong" in the alternative asset space, Franklin Resources CFO Matthew Nicholls said during the deal call.
"I don't think that the dialogue is strong and the flow of ideas is strong across the industry with many different partners. But as you know, we're very focused on alternative assets," Nicholls said. "There's no such thing as finding a great thing in difficult markets for a lower price, for example, in particular, in the alternative asset space."
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Industry experts also predict "further acceleration" in strategic M&As in the alternative asset management industry.
"There is no question that the alternative asset management industry is increasingly becoming a scale game, and while some of the largest firms have had quite a bit of success expanding into adjacent strategies organically, we believe many smaller/mid-tier companies in the space will increasingly look to strategic M&A in order to drive greater scale and diversification to better compete across the industry," JMP Securities analyst Brian McKenna said in a May 25 industry note.
In terms of the target's AUM, five other deals announced in 2023 made it to the top M&As in last 12 months. These included New York-based Sound Point Capital Management LP's proposed acquisition of Assured Investment Management LLC Canada-based CI Financial Corp.'s deal to acquire Houston, Texas-based Avalon Advisors LLC and New York-based Kore Private Wealth LLC and Newton, Mass.-based Adviser Investments LLC's proposed acquisition of Ropes Wealth Advisors LLC.
CI Financial Corp. was an acquirer in three of the largest asset management deals in the last 12 months, with its May 1 acquisition of Avalon Advisers eighth largest in terms of target's AUM.
Top advisers
Ardea Partners LP was the top US asset management deal adviser in the last 12 months based on the number of deals and the target's AUM. The adviser worked on four deals, with total AUM of the targets at $189.64 billion.
Berkshire Global Advisors LP, Colchester Partners LLC and DeVoe & Co. also advised on four deals each with total AUM of targets at $15.20 billion, $11.84 billion, and $6.94 billion, respectively.
