1 / 11

Mergers and scale in an uncertain future

Mergers and scale in an uncertain future. “Everybody wants to go to heaven, but nobody wants to die”. PAST SUCCESS * Not-for-profit *simple products and fees * low-cost distribution *collaboration *stable cash-inflow *little demand on.

Download Presentation

Mergers and scale in an uncertain future

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Mergersand scale in an uncertain future “Everybody wants to go to heaven, but nobody wants to die”

  2. PAST SUCCESS * Not-for-profit *simple products and fees * low-cost distribution *collaboration *stable cash-inflow *little demand on • PRESSURE ON COLLABORATION • Increased scope for competition between funds • Self reliance, insourcing, investing in brand challenges existing collaborative ventures • Consolidation and fund inflows see disparity in size and scale between funds • PRESSURE ON COSTS • Distribution model changing. Alternative channels costly. New low cost competitors • Demography, fund outflow and/or proliferation of products and fees • Consumer preference for bundling delivered through mobile technology

  3. Big isn’t everything, but it’s not nothing

  4. Fund growth is uneven Net contributions – industry and public sector funds 2012/13 Source: APRA

  5. As is labour market growth DEWR projected employment by industry 2018

  6. What’s the question? • What will define our fund’s footprint into the future? • Do we have a stable, predictable, secure and low-cost source of new members and cash in-flow? • Would our fund win its current default business in an open tender? • Is self-interest a factor in our decision?

  7. Are mergers the answer? • Scale in administration and investments • Reduce/eliminate competition between NFP funds • May secure reliable cash flows to merged funds • Should only be pursued where: • merger will improve net investment performance for the majority of the members of the merging funds • offer members complementary product and service range • Merging should strengthen distribution capability

  8. AGEST looked for growth first

  9. Selected tender process

  10. Programme of work • Due diligence and cost-benefit analysis • Detailed review of economies in admin, trustee, and investment • Post-merger valuation alignment • Group life insurance • Finance and tax policies, including any contingent tax liabilities, stamp duty for each asset, DTA, present entitlements to trust distributions • Implementation planning, governance and responsibility • Relationship with service providers, especially outgoing providers

  11. Risks • One-off merger costs are excessive • Reserve equalisation, run-off insurance, staff redundancies, long-term leases, administration and custodian transitions, due diligence, member communications, stamp duty • The benefits of the merger are not realised • Poor execution, wrong partner selection • Diminished affinity with fund amongst members, employers and stakeholders

More Related