By Nick Evans
Partly by design, but mainly by accident, this issue of
EuroHedge profiles the progress of the two biggest recent hedge
fund M&A deals in Europe: Mans takeover of GLG at the
end of 2010 and Hendersons acquisition of Gartmore at the
start of 2011.
In both instances, what emerges most clearly is the
importance of culture when putting together asset management
businesses where the only real assets are your own people and
the investors they serve.
In the case of Man, CEO Peter Clarke is adamant that the
very different and separate cultures of Man and GLG are to be
cherished and nourished rather than to be blended or forced
together and that those who say that cultural
differences may stymie the strategic rationale for the
combination are missing the point.
In the case of Henderson, the firms senior management
has been quick to see that it is Gartmores AlphaGen brand
that has the chief credibility with investors despite
all the earlier Guy/Rambourg kerfuffle and is thus using
it as the springboard for the reinvigoration of its enlarged
post-acquisition hedge fund business.
The prospects for these two deals achieving their potential
are helped by the fact that both of the acquiring businesses
are led by people who know and understand the hedge fund
Clarke has been involved in numerous M&A deals in the
hedge fund space over the years, from his time as Mans
finance director and then as deputy CEO before taking over the
group chief executive job in 2007.
And Hendersons CEO Andrew Formica who is still
only 40 is a former hedge fund manager himself, who
previously ran the firms multi-strategy equity fund and
thus also has first-hand experience of the dynamics and drivers
that are peculiar to this rather idiosyncratic area of the fund
Culture is, of course, a very hard thing to identify,
create, define and sustain in any people business. But you know
it when you see it, when youve got it and when
youre losing it.
And understanding, valuing and retaining it will always be a
vital element of success for any firm in a hedge fund industry
that, for all the institutionalisation and commercialisation of
recent years, remains highly individualistic, iconoclastic and
often plain maverick.
In many, if not most, successful and sustainable hedge fund
businesses, that is the essence of their value. It is what
creates brand power when times are good and it is what
can give firms strength and resilience when things are not
going so well.
And it will be always be the key thing to maintain if
as seems increasingly likely the asset management
industry is entering a period of consolidation through
acquisitions, mergers, take-ons, strategic partnerships and
many other forms of business combinations.
Man/GLG and Henderson/Gartmore are the two largest deals of
their type in Europe. But there have been plenty of other
smaller, private deals such as GAM recently buying Arkos
in Switzerland, Principal taking a majority stake in
Finisterre, Schroders taking 49% of RWC, Matrix adding Olympus
Capitals Candela fund, Avoca acquiring Liontrusts
credit hedge fund business, Northill taking over the systematic
firm Wellfield, Neuberger Berman buying a stake in CFM in
France and there could well be many more to come.
For many smaller funds and firms especially, the changing
dynamics of the industry are making life harder every year.
Many will be looking at their options in an increasingly stark
business climate where success on their own may now be looking
out of reach.
For those that wish to keep going and for whom continuing to
go it alone is an increasingly unattractive or unviable
proposition, finding the right partner and the right way to
take the business forward will be the critical challenge.
Making money and building assets are hard enough things to
do as it is. But building a business structure that supports,
complements and enhances the investment core of a firm is every
bit as hard and every bit as important.
So whether or not the long-predicted wave of consolidation
does finally start to wash through the hedge fund industry will
largely depend on whether or not firms and funds have succeeded
in creating something special that makes them stand out.
And, perhaps more than anything else, that will ultimately
boil down to whether or not the principals of those businesses
have managed to create a culture that has value, staying power
and appeal to their people, to their investors and to
their potential partners.