Product and staff rationalisation is an expected by-product of the acquisition of Barclays Global Investors by BlackRock, which would see the creation of the world’s biggest fund manager with assets under management of more than US$2.7 trillion.
BlackRock announced on Friday it had executed a purchase agreement to buy BGI, including its ETF platform iShares, from Barclays PLC.
The combined entity will include BGI’s risk analytics, quantitative investing, indexing and retirement solutions capabilities and BlackRock’s active fund management, tailored solutions and risk management via BlackRock Solutions.
Grant Kennaway, general manager of research at Lonsec, said while there was not a lot of overlap between the firms’ capabilities, some rationalisation could be expected in staffing and product range given BlackRock’s quant-style equities capability.
The merged business would have more than 9000 employees in 23 countries.
Australia, BlackRock is very strong
at equities, and they’ve also got the iShares business so any overlap is just
in BlackRock having a quant-style equities capability as well,” he said.
“There will be some good outcomes for
investors overall. Both businesses have very high quality personnel so the
combined entity will be a very high quality operation. The only caveat is you’d
expect once the businesses are joined together there’d be some rationalisation
in product and sadly for people. Obviously things like sales and marketing and
back-office operations, you’d expect to see some rationalisation there, for
But Kennaway added that it was still “very
early days”, and even if the deal goes through it would be some time before
there is any clarity on the implications for the Australian business.
“Most of the decisions that need to get made
will be made offshore so the Australian operation is a long way away from
knowing how it’s going to look,” he said.
Barclays previously agreed to sell iShares
to private equity firm CVC Capital Partners under a “go shop” arrangement. CVC
had five business days from June 11 to make a counter-bid that considers to match
the terms of BlackRock’s agreement to acquire BGI. If no offer is made, Barclay’s
board of directors will execute the purchase agreement with BlackRock and
recommend it to Barclays’ shareholders for approval.
The deal is expected to close in the fourth
quarter, and would give Barclays a 19.9 per cent stake in BlackRock.
BlackRock said in a statement that the two
firms would seek to expand their relationships in investment banking and wealth