Mix and match

Merger and acquisition (M&A) activity in the business world generally runs in cycles. One organisation buys or merges with another, which in turn can trigger a frenzy of activity within a specific sector.

Those corporates at the top of the tree may eat up smaller players, or form relationships with their peers, in order to maintain their position as industry heavyweights.

Alternatively, small or mid-range players often partake in M&A activity in order to gain marketshare, and compete more effectively with the larger businesses.

Once the deals have been done, CEOs then face the task of running huge conglomerates, often with disparate areas of business.

Further into the cycle, those same companies may begin a restructuring process where invariably they sell off loss-leaders and launch a strategy of ‘returning to core business’. After a period of relative peace, a sudden acquisition may trigger the cycle once again.

In financial services, the scenario is no different. In fact, as all players are necessarily experts in financial management, the temptation to acquire, and requisite funding needed to do so, is often more readily available in this sector than others.

Currently, however, all appears quiet on the homefront. Post the ANZ/ING, BT/Westpac and NAB/MLC deals, it seems there are few potential pairings left.

However, M&A activity often brings surprises, so Money Management has made a few speculations of its own, looking at the impact on both funds under management (FUM) and funds under administration (FUA) in the platform sector should the unthinkable occur.

AMP /St George

The joining of these two groups has almost become an urban myth, having gone around the rumour mill more times than anyone can count.

However, Graham Rich, Brillient’s publisher, says: The impact of such a merger really would change the landscape of the retail Australian funds industry.

AMP already uses the Asgard platform for some of its administration, but the combined entity would be the largest group by both FUM ($42.3 billion) and FUA ($44.3 billion).

The new group would also effectively displace NAB/MLC as leader of the pack. NAB would be a very close second by FUM ($41.8 billion), but a more distant second by FUA ($41.8 billion).

CBA would move to third place, with FUA of $31.8 billion.

Perpetual /Aviva

Taking a more left-of-centre approach, Money Management looks at the impact of a merger between Perpetual and Aviva.

Unlike AMP/St George, if these two groups combined it would not materially alter the platform industry, but would certainly have a beneficial impact on the two companies concerned.

The combined entity would be the fifth largest by FUM, and hold seventh position for FUA with $18.5 billion for both.

While the top 10 groups would remain untouched, a merger would consolidate Aviva’s position within the top 10, moving it from ninth rank for FUM/FUA to fifth and seventh respectively. Perpetual would also benefit by moving up from its current position at 11th place.

The barrier to entry for a top 10 ranking would increase, of course, meaning that the next largest group, Mercer, was half the size of any of the top 10 by FUA, Rich adds.