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Mergers and Acquisitions
of Third-Party Marketing Companies
Since the advent of
"third-party marketing companies" offering retail investment services
to banking institutions, the industry has seen explosive growth in the number of
firms competing in the banking channel.
The industry began in 1982 when
two firms, operating independently and at opposite ends of the continent,
started marketing their services almost simultaneously. One firm focused on
securities brokerage and mutual funds and the other firm focused on annuities.
In a span of 5 five years, this
new industry had grown to about 20 firms and, by the end of its first decade,
there were over 100 third-party marketing firms. The industry peaked in 1994
when our on-going research activities identified over 300 marketing companies
that provided investment products and services to banking institutions.
While additional firms
continued to enter the marketplace, the industry began to restructure and
consolidate in 1995.
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Product vendors, particularly
insurance companies, acquired some TPMs in order to better control the
distribution of products.
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Larger TPMs acquired some of
their smaller peers to expand their client base and gain operating leverage.
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Some firms which had entered
the banking arena as an adjunct to their other distribution channels,
decided to abandon the banking channel.
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Some of the smaller TPMs that
had failed to reach critical mass, simply went out of business.
By 1997, the number of third-party
firms declined to about 200 firms. At present, there are about 100 TPMs.
ABC has been very active in the
consolidation process by participating in over 30 M&A transactions. We have
advised both buyers and sellers in the following areas:
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Determining potential value
of TPMs.
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Developing "pitch books".
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Introducing buyers and
sellers.
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Developing detailed analyses
of target companies’
history and current business.
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Determining target companies’
strengths and weaknesses.
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Determining structural and
pricing options.
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Participating in transaction
negotiations.
As with all of ABC’s
consulting services, M&A assignments are accomplished with utmost
confidentiality.
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