DWS looks to have the go-ahead from Deutsche Bank to seek out takeover opportunities in a move that would ramp up its rivalry with French giant Amundi.
Deutsche Bank currently holds a majority stake in the DWS, and CEO Christian Sewing appears to have given the nod for the German asset manager to target major acquisitions, according to Bloomberg News citing sources.
Asoka Woehrmann, head of asset manager DWS Group, is searching for both large-scale and bolt-on acquisitions. With DWS’s majority stakeholder initially reluctant to dilute its ownership in the company, Woehrmann now appears confident that Sewing would allow the company to sell equity to finance a potential deal.
This news broke around the same time as Société Générale agreed to sell its asset management arm, Lyxor, to Amundi for an expected fee of €825m.
When Amundi takes on Lyxor’s €77bn assets, the merged company will have €142bn assets under management (AUM).
Significantly, Amundi’s AUM will roughly double meaning the company overtakes DWS as Euope’s second-largest ETF issuer with a market stake of 13.6% versus the German asset manager’s 11.2%.
Amundi now faces the challenge of consolidating its own products with Lyxor’s suite, with 14 indices each being tracked at least four of the merged company’s products – and these products accounting for around 30% of its total AUM, according to Bloomberg Intelligence.
Consolidating Lyxor’s ETF range key for Amundi in battle with rival DWS
If this process of assimilation goes smoothly, a trimmed down and merged product range could see Amundi enjoy the benefit of economies of scale. These potential large and combined products won’t just enjoy the accolade of having more assets tracking them, but as a result could create scope for fee reductions, making them even more competitive.
The Amundi-Lyxor deal will be finalised over the coming quarters, and this will put a dent in Sewing’s ambition to make DWS a top 10 global asset manager.
Having seen an attempted merger with UBS’s asset management arm fall through two years ago, there are rumours that a move to take over the asset management unit of Credit Suisse could be on the cards for DWS, with former UBS AM head, Ulrich Koerner, now leading the unit at the Swiss bank
A Bloomberg Intelligence report said, pending the right acquisition candidate, DWS may choose to expand its Asia-Pacific (APAC) focus as it currently only derives 5% of its revenue from the region. Likewise, it could opt to further its collaboration with Beijing-based Harvest Fund Management and Japanese insurer, Nippon Life.
While Amundi’s power move is not a knock-out blow to DWS, it will be interesting to see how the German issuer responds to reassert its position near the top of the European ETF food chain.