Unlocking Real Value Blog

Investment Manager Merger Mania Set to Begin?

It was announced earlier this week that two Boston-Based investment managers – Congress Asset Management and Prelude Asset Management – were set to merge (Boston-Based Asset Managers Combine Forces). The combined firm will have approximately $6.4 billion under management.

Intriguing is the question of whether this portends the beginning of a wave of mergers in the industry. Personally, I think that it does. It was almost exactly a year ago in fact that I wrote about this topic (see blog of March 7, 2009 – Crisis Hurts Small Managers Most). I guess my timing was a little off, but in retrospect it makes sense – firms wanted to give it more time following the economic meltdown before they considered alternatives and as the market rose last year so did optimism.

But we continue to operate in a very difficult economic environment, and I think it is inevitable that many investment management firms will see the benefit of merging – certainly from an operations point of view. But these synergies will also exist in other areas such as marketing and sales. Prelude had about $1.2 million in AUM at the time of the merger. As I predicted a year ago, it is the managers below $2 billion that are the most vulnerable. Here we are a year later – get ready to see a lot more announcements.

One last thought – one positive is that last year’s market rise (and accompanying rise in AUM) will probably save some jobs, as firms are feeling better than they were a year ago and are probably in better financial shape. But the overall rationale for merging remains.

Leave a Reply