Buying Doesn't Make for Bigger or Better

January 11, 2002 ( - Growing organically, as opposed to purchasing other firms, is the only proven way for money management companies to increase their assets under management (AUM), new research reveals.

The latest report in The Cerulli Report series, Targeted Perspective: M&A in Global Asset Management, shows that firms that purchase asset managers pay too much for less profitable firms, which then fail to keep pace with their peers.

In fact, Cerulli Associates found that around 65% of the US firms analyzed in the study, failed to grow faster than the industry, in terms of AUM, after a transaction.

Further, about half the firms that failed to grow following the transaction were surpassing industry growth rates before they were bought, according to the research.

Cerulli also found that acquisitions only transformed growth rates from below-median growth to above-median growth in 11% of the transactions studied.

According to the research, between 1993 and 2000:

  • assets at US organic-growth firms grew by 20%
  • compared with 15% for the entire US industry.

Cerulli’s research yielded similar conclusions regarding British targets of fund management mergers and acquisitions.

The research covers over 300 M&A transactions in fund management since 1990 and includes a proprietary analysis of more than 60 specific transactions to determine post-transaction AUM growth rates.