The proposed 50/50 joint venture between Natixis Investment Managers and Generali G was most recently met with speculation that an agreement may fail to be reached by the end of the year, after strong opposition from two of Generali’s biggest shareholders, amidst political tensions and reluctance from the Italian government.
Our research into the patterns of consolidation in the European asset management industry has found that firms that grow organically tend to exhibit more fundholder-friendly practices and stronger investment cultures than firms engaged in frequent M&A activity.
While politics are unpredictable, the merger faces other challenges. Natixis IM and Generali justified the tie-up as a way to build scale, but such mergers usually require full integration of investment teams and product lines – which are unlikely in this case. Natixis’ hands-off approach with affiliates like Loomis Sayles has fostered distinct investment cultures but also failed to prevent issues like those at H2O – a firm that Natixis IM is still in the process of divesting from. Generali’s recent acquisitions of Conning and MGG add further complexity and it’s hard to see how a combined Natixis – Generali galaxy, with such disparate entities, could function as a cohesive unit.
Regardless of the outcome here, such a long period of uncertainty can have negative effects on the investment teams of both firms – lowering morale, distracting from their core mission of delivering performance for investors, and potentially leading to a loss of talent if high-performing managers decide to jump ship. This highlights the importance for investors of choosing a strong steward of capital – a firm that creates the right incentives for investment teams to deliver the best outcomes.
