Asset Growth Low After Merger, Survey Says

Alliance Capital Management, Old Mutual, Caisse des Depots et Consignations and Unicredito Italiano--beware. These firms, which are spending more than $9 billion to buy U.S. money managers, are likely to be disappointed, a new study says.

The survey conducted by research firm Cerulli Associates found that after a merger, two-thirds of the acquired fund companies saw assets under management grow at slower rates than the industry average. Two-thirds also failed to exceed their pre-merger asset growth rates.

“Mergers are harder than people think,” said Ben Phillips, managing director of Cerulli. The study looked at 33 transactions that involved acquisitions of, or mergers between, U.S. fund managers between 1988 and 1998.

The biggest reason for slower growth, Phillips reckons, is that when a company is bought out, the key executives no longer have a large equity stake. That means they are lacking a powerful motivator to keep the business growing.