Consolidation in the wealth & asset management sector – what it takes to succeed

Christoph Baertz Partner, Leader Financial Services Deals, PwC Switzerland

In the ongoing process of consolidation sweeping the industry in Switzerland and the rest of the world, wealth and asset managers have to be alert. Whether you’re a potential buyer or seller, there are important points to keep in mind to gauge whether a deal is the right thing, whether the moment is right, and how to maximise the value from the transaction.

In this blog post we survey the global consolidation scene and give some pointers to help wealth and asset managers – in Switzerland, but elsewhere too – navigate mergers and acquisitions smoothly and profitably should the occasion arise.

1. What are the main features of consolidation within the global wealth & asset management sector?

In major wealth and asset management hubs we’re observing an ongoing process of consolidation. The Swiss private banking market is a good example, with consolidation reducing the number of banks primarily active in wealth management by 31% between 2010 and 2017, from 182 to 1251. In this blog post we shed light on the current consolidation trends, identify the drivers of consolidation in wealth management, and formulate the strategic imperatives for buyers and sellers involved in mergers and acquisitions (M&A).

Our commentary and subsequent recommendations are based on two main sources. Firstly, between 2016 and 2018 we observed over 1,000 transactions in eight key wealth and asset management hubs (you’ll see how they were distributed in Figure 1). Secondly, we have analysed the key financial ratios of the world’s 40 largest private banks to create a database serving as a representation of the most significant global players in the sector (the results are summarised in the diagram in Figure 2).

Figure 1: Deal count in key wealth and asset management markets from 2016 to 2018

Sources: PwC Analysis; Mergermarket

Let’s first look at the main trends in wealth and asset management M&A we identified on the basis of our analysis of 1,000-plus deals between 2016 and 2018:

  • Portfolio optimisation: In recent years, increasing regulatory and compliance pressure has prompted many banks and asset managers to concentrate on their core business to exploit better economies of scale. This has generally involved acquisitions or disposals to focus on their core clientele − in other words a smaller number of their largest and most profitable core markets.
  • Offshore to onshore: Financial centres such as Switzerland that have traditionally had many of their clients come to them from abroad have realised the need to take the bank to these ‘offshore’ clients. This has led to a struggle to strengthen local presence in markets abroad, particularly in the Asia-Pacific region, by means of acquisitions. The result has been a number of significant transactions where global private banks have acquired wealth and asset managers in Singapore, Hong Kong and other hubs.
  • Increasing prices: Probably the most useful multiple when it comes to valuing a private bank is the goodwill to assets under management (AuM) ratio. Since 2017, we at PwC have observed an increase in goodwill paid relative to assets under management. In other words, transactions are getting pricier for the buyer.

    In Switzerland, we measured an average goodwill to AuM ratio of 1.7% for the years 2017 and 2018, way above the 0.5% observed between 2009 and 20162 . This trend can also be seen in English-speaking markets such as the UK or the US, where deals have historically had higher goodwill to AuM ratios than their Continental European counterparts (again, see PwC’s 2018 report for more details). As recently as May 2019, Goldman Sachs announced that it would acquire US wealth manager United Capital (approximately US$ 22 billion in AuM, US$ 80 million in equity) for US$ 750 million. This gives a goodwill to AuM multiple of 3%, indicating an extraordinarily high valuation3
  • Quality over quantity: We’ve observed that the prices paid for client assets in transactions are driven less by pure volume than by the quality of these assets from the bank’s or wealth manager’s point of view. In other words, buyers are willing to pay a premium for portfolios of certain types of mandate or more profitable clients. This development is particularly noticeable in asset deals (as opposed to share deals).
  • Concentration: Overall, continuous consolidation can be observed in major global wealth and asset management hubs. Most often, smaller players (in Switzerland, foreign bank subsidiaries in particular) sell their business to competitors or to larger players that are actively consolidating the market. In Switzerland, we have observed an average of eight private banking deals a year since 2002 (see PwC’s 2018 study for more details).
2. What are the macro- and microeconomic drivers driving consolidation in the sector?

In the last section we described our conclusions on the basis of our worlwide deals deals survey. Our findings suggest that what’s happening is an ongoing consolidation within the global wealth and asset management sector itself, largely driven by horizontal corporate deal activity within the industry.

Let’s now move on to our database of the world’s 40 biggest private banks. The figures we have managed to derive from this ‘index’ have enabled us to draw some interesting conclusions about the broader economic factors driving consolidation in the wealth and asset management industry. Here’s a summary of the key trends:

  • Increasing cost base placing a significant burden on market players

Despite this strong market growth, the majority of players in the wealth and asset management sector have been struggling to effectively and profitably exploit their top-line growth. This is largely because they are facing increasing (client) acquisition costs, as well as still having to contend with a high level of regulatory requirements. This trend is illustrated by the bars in the graph in Figure 2, which show how growth in operating costs has exceeded growth in operating revenue in relative terms.

Making life even harder for established players is the fact that fintechs and various other new market entrants are significantly changing the dynamics of the industry by introducing novel private banking product and service offerings. Even though only a small fraction of these innovative challengers might survive in the longer term, they are accelerating the pace of digital change and shaping new client expectations.

Another factor driving operating costs is the ageing of the existing customer base. Banks and wealth managers are having to step up their efforts to efficiently retain client family wealth or gain market share in the relevant younger client segments.

Figure 2: Operating revenue, costs and profit versus assets under management: averages for the world’s 40 largest listed private banks from 2015 to 2018
  • Acquisitions used as a corporate tool to drive growth and strengthen profitability  

With asset growth becoming an essential source of top-line growth, some industry operators − especially forward-looking mid-tier players − have been using acquisitions to remain competitive by driving market consolidation within the sector. This has created a challenging environment where banks and asset managers struggle to gain the scale they need to manage an increasing cost base across higher levels of assets under management and thus increase their overall profitability.

3. What are the strategic keys to success in wealth management mergers and acquisitions?

Now we’ve examined the deals landscape and the main drivers of consolidation, it’s time to come up with some concrete recommendations for wealth management decisionmakers. How do you judge whether a deal makes sense, or whether the timing’s right? If you do opt for a purchase or sale, how do you squeeze the most value out of it? In this final section we summarise some of the pointers we’ve formulated for prospective candidates on both the buy and sell side.

  • Timing: Our observations suggest that market participants (especially on the sell side) start seriously thinking about the possibility of a deal too late. The best time to consider selling is generally when business is going well, as potential buyers are looking to invest in attractive growth stories. But typically the opposite happens: many wealth and asset managers, especially in Switzerland, are seeing their profitability decline, so it is too late in the cycle to make the most of this. The flipside of this argument is that if you’re on the buy side, defining your acquisition criteria early on is crucial for success.
  • Story: It’s often worth considering optimising your portfolio before selling (‘dressing the bride’). This could include selling parts of your client portfolios, for example certain geographic markets or size buckets. This especially applies to banks or asset managers that are aiming for a share deal but lack a clearly defined client profile.
  • Retention: Human capital is key in this business, so you want to avoid attrition of crucial personnel and assets under management. It’s important to get the timing right when you inform your people about an anticipated transaction, and make sure you offer attractive retention packages so that your deal doesn’t lose value.
  • Integration: Often overlooked in transactions, integration is key to the success of a deal in the long term. It’s essential to have a clear and realistic post-merger integration plan, including mapped out responsibilities and established post-deal controlling. Post-merger integration planning needs to begin as soon as you start negotiations.
  • Professional advisor: With the support of an experienced advisor it’s easier to coordinate your efforts, avoid the pitfalls, assure secrecy and maximise the value you get from the deal. Figure 3 illustrates how a good advisor can help.
Figure 3: How a professional advisor can increase your chances of a successful deal (sell-side perspective)
4. How can PwC and Strategy& help?

PwC’s Financial Services M&A and Strategy& have supported over 100 successful transactions in the financial services area since 2010. Whether you’re considering a corporate merger, sale or acquisition, we can provide support throughout the process from strategy and deal origination, due diligence and deal execution to post-deal services. Feel free to call us if you’d like to discuss your plans.


Christoph Baertz

Partner, Leader Financial Services Deals, Zurich, PwC Switzerland

+41 79 598 71 83


Adrian Heuermann

Director, Deals Financial Services, Zurich, PwC Switzerland

+41 58 792 1517


Manuel Rüdisühli

Assistant Manager, Deals Financial Services, Zurich, PwC Switzerland

+41 58 792 4994


Jonas Heydasch

Associate at Strategy&, Zürich, PwC Switzerland

+41 58 792 31 62