Asset Management Mergers and the Challenges Ahead

As the industry absorbs news of yet another mega merger, commentators are beginning to consider the impact of the deal. A report from Pensions & Investments predicts that the combination of Legg Mason and Franklin Templeton will result in a powerhouse with strong capabilities. Other media see operational synergies and challenges ahead as the firms blend different operating approaches. Morningstar’s Russ Kinnel has a few suggestions for the combined firm and related constituents including fund directors. Kinnel suggests that the combined firm: ensure that all fund mergers result in lower costs; merge some mediocre funds into strong funds; and be sure that fundholders benefit as much as stockholders. He also advises fund directors to “focus on better management and lower fees rather than protecting their jobs.” The Legg Mason-Franklin Templeton merger will involve approximately 50 fund directors overseeing hundreds of funds. For a comprehensive overview of mutual fund mergers and adviser combinations see the MFDF’s white papers on both topics. In addition, Casey Quirk recently authored a paper on common M&A pitfalls faced by asset managers and how they can employ thoughtful integration strategies.