A proposed merger or partnership of La Banque Postale AM and Fédéris Gestion d’Actifs is set to shake up France’s institutional market.
La Banque Postale is stepping up the development of its asset management subsidiary. In February, the firm signed a partnership with Aegon, which will see the Dutch insurer pay €112.5m for a 25% stake in La Banque Postale Asset Management.
The deal is expected to take effect by the end of Q2 2015, with the motivation of “strengthening La Banque Postale’s expertise and positioning” towards institutional investors, including insurance companies.
And in further activity, La Banque Postale also announced it was pursuing talks with French mutual insurer Malakoff Médéric for a deal involving its asset management subsidiary Fédéris Gestion d’Actifs, with the intent of merging its activities with La Banque Postale AM’s by the end of 2015. Such a deal would create the fourth biggest player in the French institutional market, managing more than €170bn of assets.
The proposed mergers of the businesses is indicative of a possible M&A trend locally. However, it also points to the difficulty in executing such deals. According to current information, Malakoff Médéric
would take a 5% stake in La Banque Postale AM and its subsidiary Fédéris Gestion d’Actifs, managing €26.1bn of assets, would work closely with La Banque Postale AM, managing around €150bn of assets.
The deal would also enlarge the range of products of both asset managers, especially in SRI funds for La Banque Postale AM. Among other goals, La Banque Postale AM wants to develop its asset management activity in mutual funds.
Thomas Rocafull, financial services director at Paris-based advisory firm Sia Partners, commented: “It is a very smart move as funds will be then diversified, targeting institutional investors as well as retail clients. Instead of only concentrating, La Banque Postale and Malakoff Médéric subsidiaries will be creating outlets both in insurance and banking worlds.”
Rocafull underlines that asset managers getting closer follows a current trend in the market. “The last big French consolidation involved Crédit Agricole and Societe Generale’s asset management subsidiaries when they created Amundi. However, there are still numerous ‘small boutiques’, with less than €10bn of assets under management, in this sector. Margins in the market tend to get narrower due to the issues around transparency and commission.”
“If you want to remain independent as a ‘small boutique’, you only have two choices: being a niche player, but it’s becoming less and less easy; or creating volumes, but there is an important race for size and mergers,” he explains.
Rocafull also argues that the two subsidiaries would complete each other. “La Banque Postale AM is serving retail clients but also wants to enter both the private bank market and corporate markets. Those markets’ clients are looking at more sophisticated products, with higher yield. This is where
Fédéris’ expertise comes in, which is lacking at La Banque Postale AM for now.
“By contrast, Fédéris has a medium size, which is not small enough to be a niche player and create added value, and not big enough to create volumes, make synergies and turn into an industrial model.” Rocafull observes that, with the deal, La Banque Postale AM would “gain 5 to 10 years in accessing its targeted markets”.