The 2008 economic crisis forced potential buyers in the DC world to shore up their own businesses rather than looking at acquisitions. But those concerns are all past, it seems. Major deals and restructuring have significantly altered the DC industry landscape, with more — many more — to come.
Like tectonic plates that shift imperceptively until the earthquake hits, radical and subtle changes are taking place in the DC market that will forever change the landscape over the next three years. Like with earthquakes, some moves create energy while others create the need for other moves. For example, the pending acquisition of JP Morgan’s RK division by Great-West will cause large RKs without multi-market strategies to buy into those markets, while weaker players will realize that they have three choices: get bigger (and fast!), hunker down to reap decent profits from a smaller, scaled back business, or sell to a larger provider. The changes are hitting all segments, led surprisingly by IO providers, followed closely by RKs and BDs, with each segment affecting the others.
Here are the 10 major deals that have occurred or have been announced over the last 12 months:
• JP Morgan sells its RK division to Great-West — a game changer for these companies and the entire DC industry
• Putnam merges its RK group with Great-West as Bob Reynolds consolidates power and offers the first real challenger to Fidelity (although they have a long way to go)
• RCAP buys Cetera — RCAP is led by Nicholas Schorch’s non-traded REIT company, which bought First Allied in 2013 and has three other IBD deals pending (with more rumored)
• TIAA-CREF buys Nuveen from Madison Dearborn — the 403(b) giant and top five DC RK makes a major move into the investment management world to get access to BDs other RKs for their own investments
• Madison Dearborn takes NFP private — the private equity firm seems to see distribution as more important than investments
• Verisight buys Daily Access — there is a very vibrant and large (in terms of numbers) small TPA RK market, with a lot of deals happening and pending, but this deal is the biggest, led by Stone Point, which bought Verisight recently
• Legg Mason buys QS Investments — sensing that asset allocation might be even more important than active management, Legg Mason supplements their IO business
• Ridgeworth is sold to management and Lightyear — following a strategy that’s the opposite of Madison Dearborn’s, Lightyear sells distribution and invests in an investment management shop
• Victory buys Munder — a consolidation play led by the private equity firm that has stakes in both
• CPI is renamed CUNA Mutual Retirement Solutions — while you might quibble with putting this action on the list, it signals the further integration of a relatively small firm with a very large, mutually owned financial services company that has capital and could make a big splash
