KBS - Financial Services and Wealth Management - Market Insight

KEY DRIVERS AND MOTIVATIONS FOR ACQUIRERS

+ SKILL SEEKING

• In a recent PWC survey, which asked asset and wealth managers their motivation for pursuing an M&A strategy, the dominant response related to gaining access to skilled expertise at 73%.

Deal-making will be driven primarily by skills seeking

Gain Access to skilled expertise

73%

Increase operatioal efficiency

69%

Expand market reach and penetration by leveraging strengths and capabilities

60%

Accelerate product development and time-to-market for innovative solutions

50%

Reducing costs through shared infrastructure and resources

29%

Enhancing customer experience and engagement

29%

Facilitate access to cutting-edge technology

28%

Leverage data analytics and artificial intelligence to improve investment decision-making processes

23%

Question (asset managers who said they were considering or likely to pirsue M&A): What are the factors motivating your firm to pursue a strategic partnership/consolidation/M&A in the coming 12-24 months? Source: PwC Global AWM & ESG Research Centre

• One third of firms stated that currently they lack relevant skills and talent.

• Only 39% of wealth managers are upskilling their internal workforce to leverage new technologies, e.g. training and prompting AI and the ability to harness open-source technology. However, PWC’s Global Workforce Survey showcased that employees are eager to acquire and develop new tech-focused skills. + INCREASING OPERATIONAL EFFICIENCY The second most popular reason for pursuing M&A was to increase operational efficiency. Investment firms Morgan Stanley and BlackRock acquired Parametric and Aperio respectively to bolster their SMA capabilities. These allow for vertical extension of product and service lines. This is intended to increase revenues while satisfying customer preferences. Moreover, this vertical extension will mitigate strategic and financial risks. + EXPANDING CLIENT BASE AND GEOGRAPHIC REACH M&A in the wealth management sector is driven by firms seeking to expand into other geographic regions and accessing a new client basis. Acquisitions allow for market penetration at a much faster rate than organic growth.