Natixis GAM will make DNCA Finance one of its boutiques by June.
M&A activity in the French asset management industry is in full swing.
Following Dutch insurer Aegon and La Banque Postale signing a partnership between their asset management subsidiaries, Natixis Global Asset Management has announced exclusive negotiations with TA Associates and Banca Leonardo in February to acquire DNCA Finance, managing €14.6bn of assets.
Natixis would purchase a 71.2%stake for €549m in DNCA, top mutual fund provider in France by net flows in 2014, according to figures from Lipper and the manager.
DNCA’s management would remain a shareholder alongside Natixis, but as from 2016, an exit mechanism would progressively increase Natixis’ stake to 100%.
When looking at a new industrial partner for its capital, DNCA “favoured groups with an affiliated model which were used to managing boutiques.”
“We had discussions with AMG and Royal Bank of Canada turning multi-boutique. But Natixis had a well established strategy. Natixis lets its affiliates be autonomous in terms of management and distribution. The teams are not changing and still involved in the firm. Our use of Natixis’ platform will be ‘à la carte’. We will select the countries we are interested in,” says Eric Franc, CEO of DNCA (pictured).
“Our multi-affiliate model is based on independent management, and DNCA’s successful investment approach and strong culture would not change,” confirms Matthew Shafer, head of International Distribution at Natixis.
Among other goals, DNCA has plans with Natixis to launch a test on four to five countries the firm is not covering yet.
“The major advantage is that appetite for European equities is real and tends to grow. Factors converge and make this period favourable for the selling of DNCA’s products through Natixis’ teams. The deal with Natixis is to be concluded in June, the idea is to be operational in July,” Franc underlines.
On Natixis’ side, “DNCA’s solid investment performance, controlled risk profile and strong brand name, would help us to deepen our already strong presence in international retail markets, a critical part of our long term growth strategy,” observes Shafer, highlighting the importance of DNCA’s expertise in European equities.
Is M&A vital to expansion?
“It is not vital to merge or partner but if you want to expand your business abroad, it helps,” says Franc, when asked about the benefits of mergers and acquisitions.
“At the beginning in Italy, where we currently manage €5bn, DNCA’s expertise was sold under the brand Leonardo. Without this, our development in Italy would not have been the same.
“If you want to develop your business by yourself, you will do it very slowly, in particular in the retail sector. Developing a retail investor strategy abroad takes time,” he notes.
For Vincent Bounie, managing director at Fenchurch Advisory Partners, M&A is an “obvious avenue for any large mutual fund player which has a sizeable business in others markets and wants to enter the French market.”
He comments: “For a foreign firm, France is not an easy market to penetrate. An acquisition of a boutique such as DNCA, which is a ready made platform with distribution and products, would be attractive to many global asset managers, including North American firms.”
He adds that French boutiques are interesting because “they offer products banks don’t, because they have the talent to do so and because they increasingly offer the type of high margin product, eg, absolute alpha, that French IFAs like to offer their clients.”
In 2013, Natixis said the group would invest €1.5bn in asset management over the next four years. If the deal is concluded, DNCA would form its second such acquisition.
“While we are focused primarily on organic growth, we are always looking for opportunities that expand our global product range or our global distribution network,” Shafer explains.
“We believe asset management is about more than innovative products. It is about building better portfolios.
“We have been successful by focusing on diversification and a portfolio construction philosophy that combines active management with liquid alternatives to build more durable portfolios for investors and help them weather market storms, stay invested and achieve their goals in changing market conditions,” he adds.
In the past three years, Natixis has doubled its assets on its global distribution platform and had two consecutive years of record flows, including €32.5bn net inflows in 2014.