Invesco Ltd. has recently been in conversation with State Street for a possible merger with the firm’s Asset-Management division. While the result of the ongoing discussion remains uncertain, this potential merger has the possibility of becoming one of the largest in the industry.
However, the terms of the deal continue to remain uncertain, it is known that the Asset-Management business of State Street is one of the world’s biggest custody banks and offers administrative and accounting services, it is also responsible for managing approximately $4 trillion worth of assets. On the other hand, Invesco Ltd. holds a market value of more than $11 billion and manages assets worth $1.5 trillion.
After news of a potential merger started doing the rounds, the value of Invesco shares rose by nearly 8% and Sate Street’s share value rose by a mere 1%.
Over the recent years such mergers have been popular across the industry, with Invesco and State Street being some of the big deal makers. Invesco has grabbed quite a few asset managers, OppenheimerFund Inc. and Guggenheim Partners ETF business being a some of the names. Simultaneously, State Street has also expanded by bringing in Charles River System Inc., a financial data firm. They have also brought in Goldman Sachs Group to assist in reviewing their money management.
In the meantime, Trian has history with both Invesco and State Street. Trian settled with Invesco by securing two board seats for two of their co-founders, taking hold go nearly 8% of the company’s stake in the division pertaining to asset-management, valued at roughly $900 million. In 2010, Trian took over a position in State Street to help improve its poorly performed trading as well as overcoming a financial crisis. Trian let go of this position in the next 3 years, by 2013, as a result of State Street’s improved permeance.
In the recent past, State Street had also been in talks with UBS, unfortunately the deal did not work out inspire of some important of some terms being laid down.
Profit margins have gone down in the recent times in Asset-Management businesses due to investor’s hunger for low cost funding. Even though the stock market rally has provided assistance in overcoming some of the investor challenges, organizations continually feel the pressure to cut costs, achievable by participating in mergers.
Written by: Akshita Sehgal
Edited By: Kabir Chadha