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Wealth Management Acquisitions Increase Rapidly in 2005

Contributing Editor, Editor, 6 April 2006

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Consolidation in global wealth management gained pace in 2005, with acquisitions in the sector rising by 62 per cent in the year compared wi...

Consolidation in global wealth management gained pace in 2005, with acquisitions in the sector rising by 62 per cent in the year compared with 2004, according to figures compiled by WealthBriefing.

The research looked at acquisitions which were either purely wealth management, or where a considerable part of the business involved in the acquisition was in the wealth management arena. Altogether there were 91 acquisitions in the global wealth management sector in 2005, compared with 56 in 2004.

A further ten mergers took place in the sector in 2005. These figures would appear to confirm the argument put forward by a number of major consultancies and commentators that consolidation is gaining pace in the global wealth management sector.

A further analysis of the figures shows that the majority of the acquisitions were in the US, or involved a US firm as the acquiring entity, with 35 out of the 90 acquisitions. This compares with 17 in the UK.

In Switzerland – where there are more private banks that anywhere else in the world – consolidation is moving slower, with only 12 acquisitions involving Swiss firms in wealth management, or where wealth management was a considerable part of the business, recorded by the research.

Nevertheless, Switzerland saw the biggest acquisition in wealth management last year when UBS sold its three private banks, Ferrier Lullin, Ehinger & Armand von Ernst, BDL Banco di Lugano, as well as the London-based asset manager GAM, to Julius Baer.

The effects of that sale are already being seen in terms of consolidation, with Julius Baer re-branding Banco di Lugano with its own name and with plans to do the same to the other two banks within the first half of 2006.

Cross-border acquisitions comprised a considerable amount of total acquisitions, with 39 of the 91 involving an acquirer from a different country than the firm being acquired. This trend would be expected to continue as globalization on international financial markets continues and regulatory moves such as the Directive on Markets in Financial Instruments (MiFID) take hold.

"Whilst there may not have been many large transactions the data shows that there are numerous medium and small acquisitions,” said Bruce Weatherill, global private banking/wealth management leader for PricewaterhouseCoopers, on being presented with the findings.

He added: “In the never ending search for clients to help boost 'revenue', wealth managers are seeking infill acquisitions and specialist teams or businesses. The pace of consolidation according to our global survey ( www.pwc.com/wealth) will rise both in domestic markets and as wealth managers seek to grow domestically as well as expand into new markets overseas.

“However, there is less low hanging fruit and opportunities need to be carefully teased out to ensure appropriate fit and price.”

There are early indications that 2006 will see the pace of consolidation at least keep up with 2005. Already in the UK there have been two acquisitions within wealth management, with Rathbones buying Dexia’s private banking business in the UK being the most prominent.

Ray Soudah, founder of Millenium Associates, the wealth management acquisition specialist, is as well placed as anyone to view the year ahead in terms of acquisitions in the sector said: “Last year saw the seeds being laid for growth-orientated institutions readying themselves for acquisition-led strategies.”

He added: “There was a fair volume concluded last year, but much more is expected in 2006.”

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