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M&A Fast Track is Really Not All it Appears

Mutual funds that intend to grow through acquisition often fail to do so successfully, according to a study by Cerulli Associates. The company tracked a sample of 70 transactions from a total of 400 in 2001 to determine how successfully the target firms grew after acquisition.

In 54% of cases, growth at merged companies, as measured by assets under management, lagged behind that of their peers. However, this is a marked improvement over the previous year, where 67% of the same firms failed to grow as well as their peers.

Organic Growth

Cerulli concluded that organic growth is a surer strategy to grow assets under management, and U.S. fund companies that chose that path grew on average 17% over the eight years ending December 2001. Growth for the rest of the industry was 11% for the same period.