Money managers, squeezed as investors flock to low-cost index funds, are cutting deals.
Janus Capital Group Inc. and U.K.-based Henderson Group Plc are merging to reduce costs, broaden their product mix and expand geographically. Last week, Japan’s SoftBank Group Corp. struck a $3.3 billion agreement to buy alternative-asset manager Fortress Investment Group LLC, whose shares had lost two-thirds of their value since the company went public in 2007.
And on Tuesday, Legg Mason Inc. shares jumped as much as 6.2 percent after StreetInsider.com said the asset manager had received a takeover offer, citing an anonymous source. A spokeswoman for the Baltimore-based firm declined to comment on the report.
Things are heating up for an industry where big-ticket mergers are rare. It begs the question: Are more surprise hookups on the horizon if dealmaking continues? Here are a few possibilities that bankers, analysts and other industry players dreamed up in recent interviews.
BlackRock + T. Rowe
The scenario: BlackRock Inc. ($63.8 billion market capitalization as of Tuesday’s close) buys T. Rowe Price Group Inc. ($17.3 billion).
BlackRock Chief Executive Officer Laurence D. Fink has assembled an industry giant with $5.1 trillion in assets, partly through acquisitions such as the 2009 deal that brought the iShares exchange-traded funds. What he hasn’t been able to do, even after shaking up the firm’s investment team, is get consistently good results from his stock pickers. They’ve trailed industry rivals over the long term despite an improved showing last year. Fink could wait for performance to turn around or he could go out and buy better returns.
With more than $800 billion in assets, T. Rowe Price is known for its stock-picking skill. At least 80 percent of its mutual funds have beaten their Lipper averages over three, five and 10 years. Even so, the firm posted a net outflow last year as investors pulled $5 billion in the fourth quarter.
T. Rowe Price has a distinctive corporate culture -- managers tend to spend their whole careers at the Baltimore-based firm -- so any deal might need to be constructed to preserve its independence.
Other possibilities: If the company isn’t available or its size proves daunting, BlackRock could land stock-picking talent by acquiring Artisan Partners Asset Management Inc., which has an easier-to-digest market value.