The strength of the euro is making U.S. asset management companies more attractive to acquisition-minded European firms.
One euro now buys around $1.58, an increase of 17% from a year ago. That means European companies have more buying power in the United States, and they might try to snap up wealth managers in the hope that the fee income they generate can offset the earnings impact of interest rate risk.
The euro's strength against the dollar presents "a great opportunity for European institutions to make acquisitions and build franchises in the U.S.," said Burton Greenwald, the president of BJ Greenwald Associates, which is in Philadelphia.
"This is like an after-Christmas sale," said John Siciliano, a managing partner and executive committee member at the Boston merchant bank Grail Partners LLC. "But the flip side is that you're also beginning to see large financial institutions retrench."
Though economic growth in Germany has helped strengthen the European economy this year, the financial industry's travails remain global, as highlighted by the scandal at the French bank Societe? Generale.
Executives at European and U.S. institutions have been thinking in recent months about ways to restructure their businesses and sell nonessential lines.
For example, in March the German insurance company Allianz SE announced it was considering splitting Dresdner Bank into retail and investment banking pieces. And on May 16, UniCredit Banking Group of Milan said it had sold 184 branches to 12 Italian banking groups, including Banca Carige and Banca Popolare di Milano, for 747 million euros. A Boston unit of UniCredit, Pioneer Investment Management Inc., transferred investment portfolio management agreements and funds to the branches involved in the deal.
John T. Hailer, the chief executive officer for the United States and Asia at the French firm Natixis Global Asset Management, said that in today's marketplace asset managers have to have operations in every region of the world.
Natixis, which does business in 68 countries, announced on Feb. 19 that it had acquired Gateway Investment Advisers of Cincinnati. Natixis, which bought the U.S. investment management firm AlphaSimplex Group LLC last year, says it remains committed to a strategy of working with several U.S. affiliates.
"The U.S. markets have held up well for us, and we've had positive flows in Europe, so we don't really focus in specifically on what's going on in the local markets," Mr. Hailer said.
Natixis worries less about the market around it and more about what it needs to fill, or where it can strengthen itself, he said. "If we can get a good price, of course that's always nice, but our goal is to look for long-term sustainability."
Others have put such ideas into action recently. ING Group NV of the Netherlands announced on May 2 that it had agreed to buy the retirement plan and benefit service administration organization CitiStreet LLC for $900 million from Citigroup Inc. of New York and State Street Corp. of Boston. The deal is expected to close by the end of the third quarter.
On March 31 the London alternative investment firm Man Group PLC announced a deal to buy a 50% interest in the New York credit specialist fund manager Ore Hill, with Ore Hill agreeing to acquire a 50% stake in Man Group's Pemba Credit Advisers subsidiary. Man Group funded the deal with $195 million in cash together with $40 million of equity.
"We're seeing a big pickup in foreign buyer interest," said Elizabeth Bloomer Nesvold, an officer at Silver Lane Advisors, a New York investment bank and consulting firm. The exchange rate is "a factor that's prompting them to reflect on whether now is the time to come into the U.S.," she said.
Mr. Siciliano said that he thinks the U.S. economy is only halfway through its crisis and that it faces another 12 to 18 months of shakeout.
As global banks and insurance companies shed their noncore businesses, he said, "huge turnover" is likely in asset management. "I think this is just the beginning."
