M&A in Asset Management: No Slow Down in Sight

At our recent Cohen Client Conference focused on the investment industry, our “Navigating Trends: M&A in Asset Management” panel provided a glimpse into what we are seeing, and what we can expect, regarding new mergers and acquisitions in the asset management space. And it looks like all signs are pointing to full speed ahead! Below are some of the highlights from the presentation.

Taking a Fast Track

M&A activity in asset management is experiencing record-level highs, with nearly 500 transactions last year — double the number from a decade ago. Wealth management platforms are leading the activity, outpacing traditional and alternative asset managers. The panel predicted these platforms are expected to remain private longer due to capital infusion, delaying or bypassing IPOs. One of the interesting trends discussed is the heightened demand for alternative strategies.

What Buyers Want

The panel emphasized buyers should use a consistent framework with which to assess acquisition targets, discussing a “four Ps” approach to assessing a seller. Below are the areas buyers will likely focus on:

1. Performance: Any deal starts with a focus on the financial performance of the seller. But it’s not only about returns — buyers want to understand the drivers of alpha and ensure it's repeatable.
2. Process: If a manager can’t articulate how they achieved success, even strong returns would not lead to a deal. The team has to understand the metrics and process behind their own success.
3. People: Talent depth and team stability are critical.
4. Pedigree: A clean regulatory record, good reputation and cultural accolades like “Best Places to Work” are all a focus of any M&A deal.

** Bonus advice — Differentiation: Buyers will be looking for anything that makes the firm stand out and helps tell a compelling story in the market.

Key Steps to Prepare for a Sale

• Education: Sellers, particularly in the wealth space, often need significant education before reaching the deal table. A critical step for sellers is to define what kind of partner they’re looking for before engaging in conversations. Be cautious about relying on legal counsel for financial modeling. It’s important for sellers to understand earn-outs and deal mechanics themselves.
• Board Engagement: Board involvement is key. M&A is inherently disruptive, and boards may default to preservation instincts. Sellers should educate and align with the board early.
• Strategic Focus: The panel highlighted that successful transactions are driven by strategic revenue opportunities, not cost-cutting. Cost synergies, such as consolidating tech platforms or licensing, are secondary benefits. When cost-cutting becomes the primary rationale, deals often fail.

Execution Insights on Closing the Deal

• Valuation: Define this early on. Agree on key deal metrics like EBITDA multiples before diving into details.
• Project Management: Regular check-ins matter. They keep momentum and communication flowing.
• Advisers: Get the right team in place. Legal and financial teams should know the investment industry. This isn’t the time for generalists. Take your time and engage consultants that can help with this process.
• Stakeholder Alignment: Minority owners with voting rights can derail progress. Sellers must build internal consensus early.
• Technology Integration Planning: Platform consolidation is complex and time consuming. Consider engaging consultants with experience in trading and portfolio systems.

Culture Matters — Don’t Skip the Human Element

Assessing cultural fit is essential. Our panel pointed out: “If you can break bread together, you can work together.” Teams should meet face-to-face before diving into a deal to confirm values and communication styles are aligned. This kind of pre-deal compatibility check can be the difference between success and failure post-transaction.

What’s the take home message? For sellers, begin educating yourselves early, engage your board and clarify your goals before entering talks. Buyers should stick to strategic deals with real growth upside, and ensure cultural and operational alignment from Day 1.

Contact Andreana Shengelya or a member of your service team to discuss this topic further.

Thank you to our panelists for participating in this session: Jeff Bechtel, Managing Member, MHB Advisers, LLC; Chris Bellamy, CEO, Cohen & Co Advisory, LLC; Mark Goodwin, CEO, North Square Investments; and Joe Mannon, Shareholder, Vedder Price.

In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.