LONDON Mergers and acquisitions in the global wealth management industry are soaring as companies struggling to cope with costly new regulatory requirements seek to consolidate, with $760 billion (£467.23 billion) of funds changing hands in 2013, according to a new industry study.
Forty-three percent of all wealth assets under management that have been traded since 2008 were bought this year, with activity reaching "a fever pitch" as relatively low prices on offer attract new investors such as private equity funds, London-based wealth management industry consultancy Scorpio Partnership said.
Scorpio expects the pace of new deals to remain high in 2014, as increased regulation introduced since the financial crisis continues to drive up operating costs, prompting some owners to question whether staying in the wealth sector is worthwhile.
"The heat is on for CEOs in the market trying to decide what the future holds," said Sebastian Dovey, managing partner at Scorpio, which estimates that the average price paid for acquisitions as a proportion of assets under management was 1.22 percent this year, down from 1.98 percent in 2012 and 4.81 percent in 2009.
This year there has also been more interest shown in the sector by private equity groups, with Permira buying up Deutsche Bank's (DBKGn.DE) Tilney wealth management arm as well as Bestinvest, and Carlyle Group (CG.O) acquiring Diversified Global Asset Management and TCW.
"Clearly (private equity firms) have a price point that's going to be different from the asset management business because they're looking to achieve a different investment outcome," said Dovey, who also suggested that prices may be reaching a floor.
"Our view is that 1.22 percent may be running close to the base line," he said.
(Reporting By Jemima Kelly; Editing by Greg Mahlich)