This is where the real churn is happening



AbhenavKhettry of Vyana Wealth, Kolkata, has put together a fascinating list of M&A activity in India's asset management industry over the last 20 years. He has painstakingly chronicled every single takeover, every stake sale and every closure of firms in the AMC world since 1998. In all, the industry has seen 33 takeovers, 18 stake sales and 5 closures over an eventful 20 year journey that has seen the industry grow to Rs.20 lakh crores in AuM. Here is his list:

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We had a chat withAbhenav on some interesting insights that this list throws up. Here are some random musings from the conversation:

Walk the talk on long term view

There are so many names in the list who sold out which are international majors, who continue to have large international asset management businesses, but exited India during phases where near term prospects looked challenging. Isn't that what we tell our investors not to do? Don't we tell investors to take 10 and 20 year views on their investments and not get deterred by near term market volatility? Pity that so many fund managers didn't really practice what all of us collectively preach to investors.

Last bull market vs this one

When the last bull market was in full flow (2005-2007), there was no M&A activity in the fund industry. Looks like everyone was focused on making the most of the global bull run. M&A activity resumed promptly after the crash in 2008 and has continued at a steady pace through the last 9 years. From a business and market perspective, the fund industry has been in a bull market since 2014 and the growth tempo continues to remain robust, perhaps getting stronger with each passing year. That has however not put a lid on AMC exits, this time around. It does seem that irrespective of the favourable industry tailwinds, there are players who don't believe they can attain the scale they aspire for. Are we in for a manifold expansion of the industry while seeing consolidation at the same time?

ICICI Prudential is an exception at the top

Among the leaders of the industry, ICICI Prudential is an exception - in that it never participated in the flurry of M&A activity. Its entire growth story seems to have been an organic one thus far. That's quite a statement in an industry that has seen so much of M&A activity over the last 20 years.

Very few shut-downs

What's really noteworthy is that only two AMCs were shut down due to scam taints / regulatory strictures on their promoter groups. Compare this with other financial services like NBFCs or even banks, and you will see the stark difference - which really highlights the robust regulatory framework surrounding the MF industry.

Distribution business M&A extremely muted

For an industry that has seen so much of consolidation, it is indeed surprising that its fund distribution ancillary has seen so little M&A activity. One can still count on one's fingers the number of deals done in the distribution space. The IFA space in particular stands out for the virtual absence of M&A - barring a handful of transactions. Dozens of AMCs could find willing buyers when they chose to exit for whatever reasons. But in sharp contrast, IFAs exited out of the business by shutting down, not by selling out. Why have India's IFAs not been able to monetize their business the way AMCs have done? What's lacking in their business models that comes in the way of monetizing and exiting? Could it be instability and uncertainty in the revenue model itself which is putting off potential buyers? Or could it be lack of robustness in their business models (sticky and enduring client relationships, process driven approach, team that can manage business independently of the owner) which has prevented monetized exits for IFAs?

The flip side of course is that once there is some stability in the revenue model and the business model has been built on robust foundations, there is a lot that distributors and advisors can look forward to in future in terms of monetizing their businesses. The last 20 years has seena flurry of M&A activity in the fund management space. Will the next 20 see this flurry transmitting into the intermediation business?

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