Our decades of merger experience will help you plan and execute your next merger event 

Consolidation among asset owners and insurers has been driven by regulation, market opportunities and the search for greater economies of scale. For decades, State Street has provided clients with solutions to support efficient and risk controlled merger events, thereby enabling their success.

This article is part of the 2023 Transition Management Guide, which can be accessed here. 

As an industry veteran, we highlight key challenges and factors to be considered before, during and after a merger or consolidation.

Mergers present a multitude of risks and challenges, which involve varying levels of interaction across event specific factors such as changes to investment managers, asset allocation, target operating model, technology platforms, data management, governance, internal management, people, culture, timing, tax and impact to existing members.

When planning a merger event, good strategy provides a solid foundation for implementation. However, vigilant management and execution of the plan is equally important. Factors such as vague or missed communications, lack of understanding of the timing of exposure shifts or stakeholder responsibilities, change of plans mid transition and lack of coverage can have adverse effects – which is why funds look to external providers such as State Street to manage their merger events.

Identifying key stakeholders

Extensive planning and stakeholders’ collaboration are critical steps toward understanding pre- and post-merger objectives that help to clearly define roles, responsibilities and expected timeframes. This sets a solid foundation for building trust, understanding where accountability lies and establishing clear communication channels. 

Understanding the Investment structure

It is critical to understand existing portfolio exposures and structures in which investments are held, including the percentage of listed versus unlisted assets and the mix of assets in pooled versus segregated accounts. 

Formulating and documenting a plan

Once stakeholder input is collected, it is important to identify and account for factors that may impact the target timeframe and create a detailed plan. This is circulated across stakeholders for verification of accuracy and ensuring awareness of stakeholder roles at various stages. Plans are refined as new information presents or circumstances change.

Managing exposure and costs

Preserving portfolio value and maintaining desired market exposure are fundamental goals of a restructure. Achieving these requires the ability to move assets in a risk controlled manner while accessing a wide range of liquidity to support best execution.

Complexities often arise due to the number of stakeholders, the extensive planning required and the volumes and movement across multiple asset classes (often in a condensed period of time). This occurs whilst the fund maintains other functions in a ‘business as usual’ state.

Why State Street

Our client partnerships are built on confidence in our core competencies which include:

Multi broker agency model – We provide access to multiple counterparties, which is essential to achieving best execution, particularly where size and liquidity constraints exist.

Industry leadership – Our decades of experience in planning restructures and communicating across custody, registration, tax, asset allocation, risk management, exposure management and execution positions us as an industry leader. We have successfully executed US$210.8 billion of merger and whole of fund events between 2008 and 2022.

Technology – Our significant investments in multi-asset class risk, order management, execution management and investment accounting platforms helps manage complex restructure events.

Transparency – We utilize multi-asset class transaction cost analytics vendors, providing transparent insights into the quality of execution outcomes.