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Paper Explores How Duplicate Costs and Post-Integration Missteps Can Derail Mergers

A white paper from Casey Quirk delves into the downside of mergers in the asset management industry. According to the authors, the recent spate of mergers has not realized substantial cost savings because of duplicated costs resulting from “misguided efforts” by firms to keep investment teams, distribution groups, brands or technology systems separate. The authors also assert that transactions focused primarily on acquiring company size can create problems of poor post-merger integration at multiple levels. “Gaining more assets under management, an increasingly outmoded metric, does not make a firm more competitive. However, creating greater economic efficiencies and allowing more capital investment, in areas where either the market recognizes your competitive advantage or you are strategically building one, does,” they write. Effective integration programs “take difficult but decisive action” across multiple business levels, according to the authors. For instance, post-merger firms may want to avoid co-leadership structures and reduce senior headcount and related costs by 60% and centralize core business functions to cut legal, fund accounting, risk management, and outsourcing costs by 10%. “As the duplicate costs of poor or slow post-merger integration begin to bite into shrinking margins, more firms must consider the benefits of effective integration programs—particularly following sizable deals. Thoughtful integration programs minimize the cultural and human capital risks of combinations while simultaneously taking steps to ensure progressive, successful execution,” the authors write.

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