Veteran dealmaker warns of industry ‘shakeout’ after M&A frenzy

“It’s the focused boutique specialists and the big behemoths that will survive. Everyone in the middle is dead — they just don’t know it yet.”

Little, whose firm specialises in providing equity capital to boutique active managers in order to replace existing shareholders, was a renowned acquirer at BNY Mellon and later at Northill Capital.

Prior to founding Northill in 2010, Little was head of BNY Mellon’s international asset management business where he helped oversee the 2009 purchase of Insight from Lloyds Banking Group, as well as the acquisition of Walter Scott & Partners.

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However, Little claims that following a frenzied period of M&A activity across the sector, there are likely to be “pockets of excellence” hidden deep within larger asset management firms looking to break out and form specialist boutiques.

“A lot of it has been ill-considered and no more than someone saying ‘we don’t have a private credit or infrastructure business – let’s buy one’,” Little said.

“When the earn-outs are finished, there will be teams of people sitting there wondering why they joined these places.”

Several landmark M&A transactions have completed across the sector in the past five years as asset managers look to build scale and expertise, including the 2017 merger between Janus Capital and Henderson and the tie-up between Aberdeen Asset Management and Standard Life Investments.

Invesco’s $5.7bn purchase of OppenheimerFunds from MassMutual in 2018 and Franklin Templeton’s $4.5bn Legg Mason acquisition in 2020 are also cited among some of the most notable deals.

A former non-executive director of Jupiter, Little last week wrote a scathing open letter to Nichola Pease, who chairs the board of the FTSE 250 listed asset manager.

In his four-page missive, Little claimed the fund management group had “lost its way” and that the appointment of Andrew Formica as CEO in 2019 was “a mistake”.

Among his criticisms was the 2019 acquisition of Merian Global Investors, which he claimed was an example of a “generalist firm buying another generalist firm, with a poor recent performance history”.

Little also cited Jupiter’s consistent net outflows — averaging £4bn a year over the past four years — waning performance, and a significant fall in the firm’s operating margin over the past five years.

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Jupiter reported net outflows of £1.6bn for the first three months of 2022, with overall assets under management dipping by more than £5bn to £55.3bn.

“Fund management firms should not buy other fund management firms unless they have a clear strategy,” Little told FN.

“It either has to be a multi-boutique, which gives them a capability they don’t have or bolting on a team they will integrate fully, or buying in a geography they don’t have.

“But they are all convinced they have to buy.”

To contact the author of this story with feedback or news, email David Ricketts