A major asset-servicing acquisition takes place in the funds world as State Street announced it will buy the investor services division of Brown Brothers Harriman (BBH).
The transaction will cost State Street $3.5 billion in cash and make State Street the “world’s number 1” asset servicing provider.
State Street historically jostles for the top spot in asset servicing, as measured by assets under custody (AuC) and administration, with BNY Mellon and JP Morgan.
As of June 30, BBH Investor Services had $5.4 trillion in AuC and State Street had $31.9 trillion, according to the companies.
The deal covers custody, accounting, fund administration, global markets and technology services. Both parties hope to close the acquisition by the end of the year, subject to regulatory approvals.
The firms said they would leverage their best technology and capabilities from each company. BBH Investor Services brings data connectivity tools to the broad marketplace that will enhance the State Street service offering.
BBH runs the Infomediary platform for investor clients and this will support the State Street AlphaSM platform.
“Adding BBH Investor Services’ list of premier clients to State Street will also expand the base of potential users of State Street Alpha,” the companies said.
State Street said the deal would also help its strategic goal of expanding its presence in key non-US markets, including Luxembourg, Ireland and Japan, as well as Latin America, and also said the acquisition should lead to earnings growth, with an increased pre-tax margin of 31% now the ambition.
The parties are targeting year-end 2021 to complete the acquisition, subject to regulatory approvals and customary closing conditions.
Ron O'Hanley (pictured), chairman and CEO of State Street Corporation, said the investment servicing industry enjoys strong fundamentals as worldwide growth in financial assets drives industry revenues.
“This combination with BBH Investor Services helps us consolidate our position as the industry innovator and leader,” he added.
Bill Tyree, managing partner of BBH, said: “We made this decision after careful consideration of the current and future landscape of the global securities servicing industry, including how best to support and innovate for the growing breadth and complexity of our clients’ servicing requirements. State Street is the ideal partner – a firm that shares our core values of unmatched client service, integrity, trust, and a long-term commitment to sustainability.”
BBH Investor Services employees will move to State Street. The senior management team will transition to State Street in executive leadership roles, and Seán Páircéir, currently partner and global head of investor services at BBH, will join State Street’s management committee.
Following the transaction, BBH will continue to independently own and operate its separate private banking and investment management businesses.
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