DWS-UBS Tie-up Would Create €406bn European Institutional Manager

A tie-up of DWS and UBS Asset Management would create an asset manager with €405.7bn of assets managed for Europe-domiciled institutional investors, according to data submitted for IPE’s upcoming 2019 Top 400 guide to the sector.

This would make the entity the fifth largest European institutional asset manager based on last year’s Top 400, leapfrogging Amundi.

Earlier this week the Financial Times reported that Deutsche Bank’s and UBS’s asset management arms were in “serious talks” to merge.

DWS and UBS both declined to comment.

The two managers have €780.3bn assets under management between them for external institutional clients worldwide, according to IPE’s data.

Both have more assets in passive than active management for European institutions. UBS has nearly twice as much (€200bn) in passive than DWS (€106bn) for this client base. The data is as at the end of December.

According to the FT article about the merger talks, all the people close to the talks cautioned that a deal was not guaranteed and a deal announcement was not imminent.

Separately, Deutsche Bank, DWS’s majority owner, today confirmed that talks with Commerzbank about a combination of the two banks had been “discontinued”.

In a statement explaining the decision, Christian Sewing, Deutsche’s chief executive, said the banking group’s preliminary first quarter results demonstrated it was moving in the right direction “under our own steam”. Positive net inflows in DWS was one of several positive indicators in key Deutsche businesses, according to Sewing. 

The appeal of consolidation

There have been several high profile mergers in the asset management sector in recent years and Nick Fienberg, executive director at Alpha FMC, said it was “little wonder” that several managers continued to eye consolidation.

“The underlying fundamentals have not changed for many asset managers – sub-scale operations and products by comparison to the largest global players, and legacy support platforms which create rigidity in the cost base,” he said.

“At the same time, firms are faced with increasing fee pressures from low cost passive products, and sharper regulatory focus on fees and value for money.

“The result continues to be that many firms across Europe are experiencing outflows, alongside a perfect storm of fee and cost pressures.”

According to a mergers and acquisitions adviser, however, merging DWS with the asset management arm of UBS would be a “mistake”.

Ray Soudah, founder and chairman of the board of Millenium Associates, a global M&A and corporate finance advisory firm, told IPE that listing DWS had already been a mistake, and it would be a “bigger” one to merge it with another institution, while staying listed.

He suggested the motivation for such a merger would be to save costs to boost profits, and said this was a “flawed view”.

“The experience of large mergers is that in general, most lose clients who are unhappy because of the disruption.”

Asset management companies had a large cost base, but they should be focussing on improving productivity and the cost efficiency of investment performance, he said.