Scale Up or Sink Fast: Opportunities for European Fund Management Companies

The ManCo industry has real potential for M&A activity. Our Alpha M&A SMEs across London and Luxembourg offices have shared where we see these opportunities arising for the ManCo industry and step through some best practices for evaluating them.

See our latest report for a full review.

The game is changing for European Fund Management Companies (‘ManCos’).

Size and substance are essential, in terms of staff, fund expertise, operations and relationships. They are stepping into a more strategic advisory role, providing ‘all-in-one’ solutions to service clients investing billions into complex types of funds across Europe.

Alpha believes that the industry presents real potential for deal activity.

• There is a growth opportunity for incumbent ManCos looking to cement their place in the industry through acquisition
• There is an opportunity for asset managers that wish to focus on their core business areas to divest an ancillary ManCo function
• There is an opportunity for private equity firms to bring together a number of ManCos and create a scale business

Buyers who execute a coordinated set of successful deals can quickly build a strong position in a consolidating market. This requires choosing the right ‘Golden Target’ ManCo business, while making informed business decisions to maintain efficient operations as they grow.

Time is of the essence.

The most successful ManCos have a clear understanding of how to move along the consolidation curve. They will;

• Establish themselves as ‘Super ManCos’ in key geographies
• Capture a strategic position early
• Grow quickly and make sustainable business decisions
• Evolve their service offering as a ‘One Stop Shop’
• Use data and technology to their advantage

Acquisitions offer the speed necessary to deliver on these strategic priorities before it is too late. Slow movers will miss the boat, either becoming acquisition targets themselves or simply disappearing.

When first approaching a deal, it is essential to scan for ‘Golden Targets’. By this we mean those ManCos whose growth can be turbo-charged, by adding fuel to an already scalable business model.

Key characteristics to look for include;

• Acting as a strategic partner with clients and the regulator
• Offering a suite of customizable services while putting clients’ needs first
• Investing in skills and culture
• Sourcing, organizing, managing and visualizing data effectively

But it is not all about the target. The buyer must also plan for post-deal. Alpha believes that key success factors for ManCo acquisitions include;

• Identifying financial cues which guide where to focus
• Improving how the combined business is managed and operated
• Addressing the strategic blind-spots
• Creating value through synergies
• Protecting value through due diligence and integration

Alpha UK M&A: Whatever your reason for M&A activity, our entire team focuses on one industry helping clients diversify their product range, enter new geographies and obtain scale. We can support throughout the transaction, including vendor assistance, buy-side pre-deal diligence, taking control, post-deal integration and establishing strategies, to maximise value from the transaction.

Alpha Luxembourg: Alpha Luxembourg has developed a strong consulting expertise in all segments of the asset management value chain. Our Luxembourg office has a unique position in the market by advising asset managers, wealth managers, management companies and central administrations.