Wealth Management M&A Deals Surpass $1.1 Trillion Since 2008

Tom Burroughes

30 January 2013

With a spate of wealth management merger and acquisition deals enacted recently, new industry data shows that more than $1.1 trillion of assets for high net worth clients have changed hands, for a total price of $38.5 billion, in M&A transactions since the financial crisis year of 2008.

Scorpio Partnership, the consultancy, analysed 172 significant deals between the first quarter of 2008 through to the second quarter of last year, showing that the average price paid in these deals has almost halved – expressed as a percentage of AuM – to 1.98 per cent in 2012 from 3.7 per cent in early 2008. (The global private banking industry has assets under management of $19.3 trillion, according to a report last year from WealthInsight.)

Last year saw a number of deals go through, the most notable of which, probably, was Julius Baer’s acquisition of the non-US wealth management arm of Bank of America Merrill Lynch. Other transactions included Brazilian bank Safra’s purchase of Sarasin, the Swiss bank, from its Dutch parent Rabobank; Quilter and Cheviot Asset Management, two mid-tier UK wealth firms, joined forces last year. Two years ago, Deutsche Bank bought Germany-based Sal Oppenheim, one of Europe’s oldest wealth houses. BSI, the Swiss private bank that is owned by Generali, the Italian insurer, is up for sale. And Credit Suisse last autumn sold its Clariden Leu (Europe) business to Falcon Private Bank, the Swiss firm.

“The value of an M&A strategy in wealth management is still a fierce debate in the corridors of power. Is it worth it? Our view has been that to make a proper assessment there needs to be closer tracking on the deals. This examination casts light on an aspect of the industry that has not, until now, been properly charted,” Sebastian Dovey, managing partner at Scorpio Partnership, said in the firm’s report.

Among the main findings of the report, is that in looking at the prices paid for deals, only in 2009 was there an increase in the price/AuM ratio, up to 4.81 per cent from 3.7 per cent. The rise was partly driven by the businesses that were sold in that period, Scorpio said.

The average assets under management acquired per deal over the five-year period of the survey was $6.99 billion.

The UK was the scene for most of the activity, accounting for 30 per cent of deal activity across 2008 – 2012. The analysis shows the UK market beginning to consolidate long in advance of the implementation of the UK authorities’ Retail Distribution Review reform programme, which came into effect at the start of this year.

Switzerland and the rest of Europe have also seen a significant number of buyers and sellers, the report said.

Almost half of all deals were driven by European entities during this time period which indicates that“they have a typically higher propensity to write cheques for expansion compared with either US or other international operators”, the report said.