In spite of the rush to merge or acquire another firm in the money management industry, two-thirds of acquired fund companies failed to exceed their pre-transaction asset growth rates following a sale, according to Cerulli Associates of Boston.
In addition, two-thirds failed to grow faster than industry averages following an acquisition, according to Cerulli. Sixty percent failed to do either, according to Cerulli.
Cerulli based its findings on analysis of 33 fund companies that had undergone a merger or acquisition between 1988 and 1998, for which data was publicly available.
"In recent years, many industry observers - including, not surprisingly, investment banks - have recommended mergers and acquisitions as viable strategies for expanding market share and improving a fund management firm's distribution reach, manufacturing capabilities, or both," Cerulli said. Organic growth has consistently fared better than growth through acquisition, Cerulli concluded.