Investment management M&A

Many market participants remain

keen to move into higher margin
alternative investment sectors or
to build scale in their existing area
of focus.
Deal activity
Henderson Global Investors beat a wide range of
competing bidders to acquire New Star Asset
Management plc, the distressed retail asset manager,
aiming to increase their assets under management
from 50bn to 60bn to become the fifth largest UK
retail manager.
Aberdeen Asset Management acquired a significant
portion of Credit Suisse Asset Management increasing
its assets under management to some 150bn and
becoming the largest listed UK fund manager in the
process, with the intention to realise synergies and
expand business globally.
Funds Advisory
Outlook
Amid continued volatile markets and economic
uncertainty, the asset management sector continues to
see strong merger and acquisition activity.
Many market participants remain keen to move into
higher margin alternative investment sectors or to build
scale in their existing area of focus. Private equity
investors also remain interested in the asset
management sector, attracted by potential bargains
as well as by the regularity of cash flows.
At the same time, larger financial institutions such as
banks, whose balance sheets and regulatory capital
surpluses have been repeatedly dented by credit and
fair value losses, look to divest themselves of non-core
operations.
Challenges and opportunities in the sector
Falling asset values, particularly severe in certain asset
classes.
Institutional funds shifting to alternative products.
Multi-boutique manager model, combining scale and
margin.
Regulatory complexity and capital efficiency.
Innovative distribution opportunities.
Some acquisition drivers
Cost synergies and product rationalisation for managers.
Acquisition of higher yielding assets under management.
Joint ventures or asset swaps to build scale in a particular
area.
Entry to overseas markets or market share gain.
29926 sm Investment:sm 25/03/2009 09:44 Page 1
2
GLG Partners, one of the largest hedge managers in
Europe, acquired the UK asset management business
of Socit Gnrale to diversify its long only products
to its existing client base.
F&C Asset Management plc acquired REIT Asset
Management Limited, a European real estate
manager with assets under management of 4bn, to
create a combined real estate manager with 8bn of
assets under management.
Aberdeen Asset Management plc acquire Goodman
Property Investors for 109m, and by adding its
assets under management of over 7bn, is seeking to
create one of the largest UK property managers and
providing critical mass in the UK market in a particular
asset class.
Acquisition of IMS Group, a multi-manager with
5.1bn of assets under management, by BNP Paribas
Investment Partners, with the new business operating
relatively autonomously under BNPs multi-manager
platform, FundQuest.
Man Group plc and Millenium Capital Management
have acquired smaller hedge fund managers, whilst
banks and funds managed by banks, such as
Goldman Sachs, continue to build minority stakes in a
range of hedge fund managers.
Deal issues in the current environment
In a time of challenging market conditions, buyers and
sellers need deal management and well executed
strategy. Typical deal issues include:
Quality and nature of assets under management
a careful understanding of the composition and
historical development is key to assessing
sustainability of fees and strength of margins.
Geographic, sectoral, client and asset class
concentrations, as well as proportions of retail versus
lower margin institutional funds are key factors.
Product range and investment performance are critical
to future growth particularly in falling markets in
various locations and asset classes.
Access to distribution distribution is critical,
whether it be retail distribution through IFAs and fund
supermarkets or via investment consultants for
institutional opportunities. Geographic and
jurisdictional barriers continue to erode only gradually
and access to distribution into new locations, as well
as through innovative new channels, remain drivers of
acquisition activity.
lncentivisation and reward issues the past few
months have shown exactly how damaging losing key
fund managers can be. Understanding existing
remuneration arrangements, which are often complex
and varied, and the related tax obligations, as well as
structuring future incentivisation arrangements are
essential not only in retaining or attracting scarce
talent, but also in ensuring bonuses are appropriately
linked to successful performance.
Deal structuring innovative cross-jurisdictional
structures are becoming more common, as businesses
seek to ensure efficient levels of regulatory capital
and minimise tax exposures.
Post merger integration (PMI) traditionally asset
management mergers have focused on top line
growth and achieving scale. Increasingly, the
opportunity to achieve synergies through rationalising
infrastructure and location, leveraging technology
platforms and outsourcing arrangements, integrating
risk management activities and eliminating
redundancies in resourcing have been essential in
delivering a return on investment in M&A.
29926 sm Investment:sm 25/03/2009 09:44 Page 2
Investment management M&A 3
More than ever, buyers and sellers need to acquire the right advisory team.
At Deloitte, we have wider, deeper and more relevant transaction experience than our competitors. We are currently
advising on a number of acquisitions and disposals in the sector and our team can be accessed through our website
or more directly as follows:
Contacts
Financial
Calum Thomson
Partner
020 7303 5303
cathomson@deloitte.co.uk
Stuart McLaren
Partner
020 7303 6282
smclaren@deloitte.co.uk
Alan Walton
Partner
020 7007 2939
awalton@deloitte.co.uk
Tom MacDonald
Partner
020 7007 1966
tmacdonald@deloitte.co.uk
Baber Din
Director
020 7303 2878
bdin@deloitte.co.uk
Operational & PMI
Steve Barnett
020 7007 9522
stebarnett@deloitte.co.uk
Justin Nuccio
020 7303 3581
jnuccio@deloitte.co.uk
Key areas of focus include
Financial
Revenue stream
AUM
Historical flow pattern
Fee margin and product mix
Investment performance
Cost base
Maintainable EBITDA
Distribution channels/ costs
Operational
Capital efficiency
Synergy opportunities
IT platform and scalability
Risk management
Valuation transparency & governance
Collateral management
Fund administration
Reward
Share option scheme
Bonus arrangements
Pension arrangements
Future incentive strategy
Taxation
Tax structuring
IME
PAYE/NI/VAT
Fund tax issues
Regulatory
Regulatory capital
Consolidated supervision
Compliance issues
Product development
Reward
Sally Cooper
Associate Partner
020 7007 2809
sgcooper@deloitte.co.uk
Neville Bramwell
Partner
020 7007 2971
nbramwell@deloitte.co.uk
Stephen Woodhouse
Partner
020 7007 6621
swoodhouse@deloitte.co.uk
Taxation
Eliza Dungworth
Partner
020 7303 4320
edungworth@deloitte.co.uk
Ian Gelly
Director
020 7303 3189
irgelly@deloitte.co.uk
Fiona Monsen
Director
020 7007 2033
fmonsen@deloitte.co.uk
Regulatory
Stuart McLaren
Partner
020 7303 6282
smclaren@deloitte.co.uk
Uner Nabi
Director
020 7303 4238
unabi@deloitte.co.uk
29926 sm Investment:sm 25/03/2009 09:44 Page 3
Deloitte refers to one or more of Deloitte Touche Tohmatsu (DTT), a Swiss Verein, and its network of member firms, each of
which is a legally separate and independent entity. Please see www.deloitte.co.uk/about for a detailed description of the legal
structure of DTT and its member firms.
Deloitte LLP is the United Kingdom member firm of DTT.
This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the
principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice
before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers
on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or
liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.
2009 Deloitte LLP. All rights reserved.
Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered
office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) 20 7936 3000 Fax: +44 (0) 20 7583 1198.
Designed and produced by The Creative Studio at Deloitte, London. 29926
Member of Deloitte Touche Tohmatsu
29926 sm Investment:sm 25/03/2009 09:44 Page 4