European asset managers prioritize organic growth over mergers and acquisitions, according to Morningstar

According to a recent report by Morningstar on Consolidation in the European asset management industry, the sector is experiencing mounting competitive pressure and a few high-profile transactions. Despite this, the data reveals that actual consolidation remains limited and most firms are prioritizing organic growth over large-scale mergers and acquisitions.

While media reports may suggest a wave of consolidation, the reality is more nuanced. The majority of M&A activities in Europe consist of smaller bolt-on acquisitions rather than transformative mergers. Monika Calay, the director of UK manager research at Morningstar, explains that although there have been headline-grabbing deals like BNP Paribas’ acquisition of AXA Investment Managers and Natixis Investment Managers’ planned merger with Generali Investments, the overall trend shows that consolidation in Europe is still limited. Most firms are opting for organic growth by expanding their product offerings, enhancing capabilities, and improving operational efficiency rather than engaging in M&A activities.

The Morningstar report categorizes companies into three strategic profiles: “Organic Growers”, “Consolidators”, and “Opportunistic Acquirers”. The study indicates that consolidation in the industry remains selective and opportunistic rather than a prevailing trend. Calay emphasizes that organic growth, which involves product expansion and efficiency gains, continues to be the primary strategy for many asset managers.

The report raises concerns about the benefits of consolidation for investors, particularly when it comes to performance and fees. Contrary to expectations, companies that pursued M&A activities did not exhibit a significant performance advantage compared to those focusing on organic growth. Additionally, potential cost savings from consolidations did not consistently lead to lower fees. Market competition has driven pricing convergence in passive products, while fee discrepancies in active funds were influenced more by product mix and brand positioning than by scale.

Moreover, the report outlines five key integration challenges that often hinder the success of asset management mergers. These challenges include cultural misalignment, leadership complexity, talent attrition, product rationalization, and the risk of “scale drag”. Integrating these aspects can distract senior leaders from investment performance, impacting the overall effectiveness of mergers. Companies that emphasized organic growth tended to receive higher ratings, reflecting a more investor-friendly culture and operational focus.

Three major mergers – Amundi, Janus Henderson, and Aberdeen – are cited as case studies in the report to illustrate the mixed results of consolidation. While Amundi saw positive flows post-merger, Janus Henderson and Aberdeen experienced outflows and had to write down merger-related goodwill. Moving forward, Morningstar suggests that innovation, digital transformation, and personalization are more promising strategies for enhancing competitiveness in the industry. While selective consolidation may continue, agile, client-focused growth strategies are likely better positioned to shape the future of asset management.