Credit Suisse Group's deal to buy Warburg Pincus Asset Management could herald a trend of big European financial institutions buying U.S. asset management companies, industry watchers said.
The $650 million deal, announced Monday, would give Zurich-based Credit Suisse a strong asset management foothold in this country and help position it to win pension business in Europe.
European banks, brokerages, and insurers "really need to be players here if they are going to be significant players in Europe," said Thomas W. Courtney Jr., president of Courtney Group, a New York investment banking firm.
As European nations move toward privatizing their national pension systems, financial institutions will be battling not only one another but also U.S. firms for the business, he said.
"They need access to the talent and know-how here if they are to survive the onslaught of Americans when their markets open up," Mr. Courtney said.
Steven C. Pierson, a vice president with Putnam, Lovell de Guardiola & Thornton Inc., a New York-based investment bank, agreed.
"If they want equity capability, the States is where they have to go," he said.
The targets are likely to be firms with $5 billion to $20 billion of assets under management, Mr. Pierson said. New York-based Warburg Pincus has $22 billion of assets under management, including $10 billion in mutual funds.
European banks may have a greater incentive to buy asset management companies than their U.S. counterparts, Mr. Pierson said. Without the equivalent of giant brokerages like Merrill Lynch & Co. and Citigroup, Europe's banks are a vital distribution channel for mutual funds.
Lighter regulations governing the sale of mutual funds through banks may also help, Mr. Pierson said.
Prompting midsize U.S. asset management companies to sell will be their need to increase distribution, Mr. Courtney said.
"That's really separating the men from the boys in the industry," he said. "Money management firms in the middle tier can't get their share unless they have terrific marketing channels."
With valuations of fund companies at historical highs, the founders of those middle-tier companies may look to cash out while the stock market remains strong, said A. Michael Lipper, president of Lipper Inc.
"There's an actuarial clock ticking," he said. "We're seeing substantial prices in the face of uncertainty."
Mr. Courtney said that some bigger fund firms - including T. Rowe Price, with $91 billion of assets under management, and Franklin Templeton Group, with $160 billion of assets under management-are also buyout candidates.
But most big firms have corporate parents that have little reason to let the profitable units go, he said.