It seems to be all about France this summer. Olympics, politics, and now asset management.
BNP Paribas Group announced on August 1 that it has entered into exclusive negotiations with AXA to acquire AXA Investment Managers, representing almost 850 billion euros (US$930 billion) of assets under management, together with an agreement for a long-term partnership to manage a large part of AXA’s assets.
According to BNP Paribas, the deal would position it as “the European leading player in the management of long-term savings assets for insurers as well as pension funds”, with some 1.5 trillion euros under management.
The agreed deal price is 5.1 billion euros, with completion targeted by mid-2025. BNP Paribas expects an 18% return on the capital invested by the third year after integration.
Of course, the deal may not go through. French news media are already speculating over the possible impact the takeover may have on jobs. AXA has long sought a solution for its investment management division, and talks to combine it with Natixis Investment Management failed in 2017.
France’s asset management market is the largest in Europe with some 4.6 trillion euros under management. But even if the deal with AXA goes through, BNP Paribas will still lag Amundi, Europe’s largest asset manager with 2 euros trillion of assets under management.
The European industry is also in the shadow of US peers. As France’s Le Figaro daily pointed out, the planned deal between BNP Paribas and AXA would still be very far behind US giant BlackRock in assets under management.
The move takes place amid continuing global consolidation of asset management. PwC estimated in its 2023 global survey that one in six asset and wealth management companies worldwide will be either absorbed by competitors or collapse in the next five years. It also found that 73% of asset managers are considering combining with a peer, and that by 2027, the top ten largest asset managers would control around half of all mutual fund assets globally.
“Dwindling profits and increasingly divergent growth trends in 2023 have further widened the gap between the best and the rest,” McKinsey said in a study four months ago.
European asset managers also face competition from Asia, where asset growth rates are expected to be roughly 50% higher than in North America by 2027, according to PwC. No wonder the Europeans are bulking up to compete.