Financial services M&A continues its hot streak, with Goldman Sachs’ $1.9 billion acquisition of NN Group’s asset management unit NN Investment Partners. The subsidiary’s portfolio is tilted toward environmental, social, and governance investment criteria, adding a novel dimension to the latest in sector consolidation.
The ESG niche is precisely the kind of play that Lovell Minnick Partners’ investment committee chair Bob Belke told Mergers & Acquisitions are most attractive. Lovell focuses on niche asset managers that can maintain pricing power. “Find those areas where you can have specialist knowledge, where fees are defensible and have growth,” Belke says of his firm’s investment strategy. “It’s not easy to do.”
In asset management, private equity is particularly interested in active managers. Many firms have seen outflows driven by the rise of relatively inexpensive passive investment alternatives, while pricing has been soft due to performance issues.
A boom in bank M&A has also lifted financial services deal flow. Banks have announced more deals in the first seven months of this year than in all of 2020, according to the latest S&P Global Market Intelligence analysis. At $290 billion, assets sold year to date could be on track to beat 2019’s pre-pandemic figure of $410 billion.
That rally might be ending its runway however, with recent reports noting that years of consolidation have left few potential merger partners left.
Still, bank and asset manager mergers have generated stellar deal activity this year thus far. Mergers & Acquisitions managing editor Demitri Diakantonis argues that robust activity and other factors are motivating more buyers to join the party, including Audax Private Equity.