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Deutsche Bank AG’s DB CEO Christian Sewing recently gave his go ahead to its asset management arm, DWS Group, to seek large scale acquisition deals. The news was reported by Bloomberg.
Citing people familiar with the matter, the article said that the head of DWS Group — Asoka Woehrmann — is now browsing through sizable deals and bolt-on acquisitions.
Also, Woehrmann is certain that Sewing, who had been previously hesitant to have the parent company’s stake diluted, would now accord with DWS’s equity financing for potential deals. Deutsche Bank will be able to reduce its stake in DWS Group to as low as 40% without any deconsolidation requisite, due to the group’s distinguished legal structure.
One of the reasons for undertaking expansion strategy concerns with the scale of the business as it is becoming an integral factor for success in the growing margin asset management industry. Deal volumes have hit a record high since the financial crisis and asset managers are rummaging for transformative deals.
While DWS Group currently ranks 17th globally, according to ADV Ratings, Sewing aspires to position it as a top 10 global asset manager. This can be achieved with the help of a large-scale deal, which can make it competitive enough to outpace its rivals such as France-based Amundi.
Though DWS Group has nearly €790 billion in assets under management, the figure compares unfavorably with global passive providers such as BlackRock, Inc. BLK and The Vanguard Group.
Although no discussions have developed between DWS Group and other asset managers, the asset management unit of Credit Suisse Group CS could be a prospective target for DWS Group if the other party shows interest in selling the same.
Credit Suisse had recently noted that it is looking for options for the asset management unit, as its sale could presumably aid the bank to restore the capital cushion that took a major financial hit from the Greensill group and Archegos Capital Management crises.
Consolidations in Asset Management Industry
Asset managers have been in the spotlight, lately, as industry leaders are seeking global consolidation. Wells Fargo & Company WFC has signed a deal to divest its asset management business to private equity firms, GTCR LLC and Reverence Capital Partners, L.P. The transaction, valued at $2.1 billion, is expected to close in the second half of 2021.
Also, Morgan Stanley acquired Boston, MA-based Eaton Vance Corp. for an equity value of about $7 billion. Post the deal’s closure, Morgan Stanley Investment Management has $1.2 trillion of assets under management and more than $5 billion of combined revenues.
Price Performance and Zacks Rank
Over the past six months, shares of Deutsche Bank have rallied 34.5 %, underperforming the industry’s growth of 42.3%.
Currently, Deutsche Bank carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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