Not all deals are made equal. That was the takeaway from Liontrust's failed bid for rival asset manager GAM this week.
It was something of a saga, with the two asset managers seemingly keen on a deal but the shareholders standing firm, with estimations from experts that it only garnered 33% support from the stock owners of GAM – some way short of the two-thirds majority required for a deal to be reached.
In his statement, John Ions, chief executive of Liontrust, said he was “disappointed” that a deal had not been reached, as “GAM presented the opportunity to accelerate Liontrust’s strategic objectives”.
But not all were as upset. Analysts at Peel Hunt noted that Liontrust’s shares had been “significantly impacted” by the proposed deal, which they argued brought “significant execution risks” with “uncertain financial benefits”.
The brokers put a target price on the shares of 790p – some 110p more than the current 680p it currently trades at – after the merger fell through.
For Liontrust, Ions said the firm will continue to look to expand the business and its client base by “diversifying the product range, attracting talent and enhancing the investor experience”.
Reading between the lines – a new target could well be forthcoming for the acquisitive firm, which has already snapped up the likes of Alliance Trust Investments and Neptune Investment Management in recent years.
But mergers have been far from a guarantee of success and in some cases have proven to be wealth destructive rather than positive.
Jupiter Asset Management has been under pressure for several years following its deal with Merian Global Investors in 2020, while the much ballyhooed 2017 merger between Aberdeen and Standard Life – which resulted in the rebranded abrdn – has also failed to have the desired effect.
Share prices for the two firms are down 76.8% and 56% respectively over five years and both have suffered well-documented outflows from investors that have decided to move elsewhere.
One area that could provide some positive news on the consolidation front is the investment trust space.
Claire Dwyer, head of investment companies at Fidelity, told Trustnet this week that the weak capital raising market will likely lead to firms looking to snap up established portfolios that have come under pressure.
“As a sector we need to consider what the investment companies space should look like in 2023 and when I look across the marketplace I see vast amounts of opportunity of all kinds both for shareholders but also for a bit of a tidy up,” she told Trustnet.
She noted there needed to be thought over what provides the best liquidity, the best outcome for investors and for investments that suit the trust structure.
“My focus is probably going to be more on consolidation within the sector where I think we can go to boards and say ‘we can offer your shareholders something really special’,” she said.
“Creating megatrusts is probably where the industry is going to land in time and you can see the appeal in terms of shareholder rights, liquidity, economies of scale and the profile of investment trusts. At a time when costs are on all of our minds, being able to service shareholders is of utmost importance,” she said.
On this we agree. While asset manager mergers are complex, with cultural differences and operational challenges, in the investment trust world, a “tidy up” of some of the offerings – either those that are sub-scale or where performance has disappointed – can only be a good thing.