Servicing every facet of a client’s financial life requires considerable heftA new report from Cerulli Associates provides in-depth analysis of marketing, product development and strategy, pricing, sales, distribution, market segmentation, and regulatory trends in the U.S. financial services industry. Access the complete report here.
January 27, 2023, BOSTON—More than two-thirds (68%) of private bank and bank trust executives are actively considering merger and acquisition (M&A) opportunities to grow and adapt their businesses. M&A has been a mainstay of bank growth strategies for the better part of the past decade. As clients demand more intuitive technology and broader services from their private banking and trust providers, these organizations require greater economies of scale to invest in enhancing their offerings, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.
Greater efficiency through economies of scale (75%), a desire for geographic expansion (69%), and the many benefits of greater fee-based revenues (63%) are the primary motivators behind most M&A in the bank space. According to Chayce Horton, research analyst, “Larger and more scaled firms that can provide seamless and comprehensive financial services experiences for their clients have regained momentum after finding themselves flatfooted for the better part of the previous decade.” Private banks now are the fastest-growing segment of the bank wealth management industry, with annualized growth of 17% since year-end 2019.
Cerulli finds 62% of executives actively considering M&A options are looking into acquiring smaller firms in their channel and integrating them into their offering. “This option is considered one of the least cumbersome M&A strategies, with the benefits of complementary business growth and cost-cutting measures,” states Horton. “However, the acquiring firm must possess the systems and operational nimbleness to handle the injections of scale that come with acquisitions,” cautions Horton. Merging with a similarly-sized bank/trust company (38%), acquiring an RIA or family office (38%), or acquiring a digital advice or fintech provider (23%) are other strong considerations for M&A among bank executives.
As M&A in the bank space continues to churn, third parties providing products and services to these firms must prepare to adapt their strategies as well. “Often during M&A events and the resulting integrations, traditional gatekeepers and decision-makers can change in unpredictable ways. The best way to continue addressing opportunities through these events is to have conversations early and often with counterparts across the organizational chart to gauge when and what problems may arise, so that they can be appropriately resolved ahead of time,” concludes Horton.
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Headquartered in Boston with fully staffed offices in London and Singapore, Cerulli Associates is a global research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.