Global wealth management firms engaged in 65 merger and acquisition deals from the beginning of 2011 to the end of the third quarter of 2012, according to the 2012 Wealth Management Deal Tracker released today by Scorpio Partnership. During that 21-month period, $635 billion in assets under management changed hands, or 4% of all assets currently handled by the global wealth management industry.
Firms spent more than $9.42 billion for the acquisitions, or 2% of assets under management, down from nearly double that in 2010. The downward pressure on pricing is expected to continue, dropping to 1.5% in the next 12 to 24 months, according to Scorpio, a London-based global consultancy to the wealth management industry.
The sweet spot for deals was for businesses with $5 billion to $20 billion in assets under management. Emerging market businesses, which commanded premium valuations in the range of 2.7% to 3.4%, were described in the report as being favorable to sellers, or being a "seller's market."
"There is a strong interest among the top 50 market players in quickly boosting their emerging market books of business as they strive to increase their international business footprint," Sebastian Dovey, managing partner of Scorpio Partnership, said in a press release.
Dovey added that the benchmark for an international wealth management business "to ride comfortably through the next decade" is in the range of $50 billion to $70 billion in assets under management.
Most of the dealmaking took place in continental Europe, where $337.9 billion changed ownership. In Asia, M&A activity resulted in $102.5 billion changing hands. In the U.K and the U.S., asset transfers through mergers hit $80.2 billion and 64.8 billion, respectively.
While the U.K. was a popular market for acquisitions, it was deemed a "buyer's market," with valuations averaging 1.1% of assets under management, according to the report.
A total of 39 deals were onshore domestic transactions with the remaining 26 involving multiple markets. Most of the deals, 53, were acquisitions, nine were stake purchases, and three were mergers. The first quarter was the preferred M&A deal announcement period.
Scorpio predicts that the first quarter of 2013 will again post a high number of deals driven by activity in the U.K.