State Street has acquired the investor services arm of Brown Brothers Harriman (BBH) for $3.5bn in a move that will make it the world’s number one provider of asset servicing.
The deal will expand the bank’s core business of servicing investment firms and upon completion, will be among the most significant securities services buy-ups. It is also expected to see State Street take on BBH’s custody, accounting, fund administration, global markets and technology services.
The two parties plan to complete the acquisition by the end of the year, with State Street set to absorb BBH Investor Services’ employees and add BBH’s $5.4trn assets under custody (AUC) to its own books, which currently hold $31.9trn. After the transaction concludes, BBH will retain ownership of its private banking and investment banking segments.
Prior to State Street’s swoop, talks had been held in recent years between BBH and other potential interested parties, including BNP Paribas Securities Services and Northern Trust.
Now State Street has emerged as the winning candidate, the acquisition of BHH’s Investor Services business will strengthen the position of its ETF servicing business and see it overtake BNY Mellon as the world’s largest custodian.
It will also mean BBH’s product suite, such as its Infomediary platform, will support the State Street Alpha platform by expanding its base of potential users while mitigating future development costs. Further, integrating BBH investor services will assist in State Street’s ambition to deepen its presence in non-US markets such as Japan, Luxembourg, Ireland and some Latin American geographies.
Commenting on the acquisition, Ron O’Hanley, chairman and chief executive of State Street, said: “This combination with BBH Investor Services helps us consolidate our position as the industry innovator and leader.
“BBH Investor Services brings us strong talent, including industry leading service excellence and quality execution.”
Bill Tyree, managing partner of BBH, added: “We made this decision after careful consideration of the current and future landscape of the global securities servicing industry, including how best to support and innovate for the growing breadth and complexity of our clients’ servicing requirements."
The BBH business will become State Street’s latest large buy-up since its $2.6bn 2018 acquisition of Charles River Development, whose investment management platform is used to manage $30trn assets.
Elsewhere, a report from Bloomberg Intelligence last December speculated State Street was considering offloading its $3.1trn asset management business, with Invesco identified as a potential suitor.
In March, State Street was revealed as one of the firms discussing a potential acquisition of Lyxor from Société Générale, before eventually losing out to Amundi.