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Asset Management / Wealth Management
More M&A activity ahead for private banking, trust firms
Organizations need to build heft to meet growing demands from clients
The Asset 30 Jan 2023

Clients are demanding more intuitive technology and broader services from their private banking and trust providers.  And as such, these organizations require greater economies of scale to invest in enhancing their offerings.

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, according to the latest Cerulli Edge – US 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, the report finds.

Chayce Horton, research analyst at Cerulli Associates, says: “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 end-2019.

Cerulli finds that 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,” Horton explains. “However, the acquiring firm must possess the systems and operational nimbleness to handle the injections of scale that come with acquisitions.”

Merging with a similarly-sized bank/trust company (38%), acquiring a registered investment advisory business 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 activity in the bank space intensifies, 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,” Horton notes. “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.”

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