Merger and acquisition case study: An acquisition in the institutional investment industry

The challenge

Milliman was contacted by the leadership team at an organization (Acquiring Firm) which is a leading provider of institutional investment products and services. Acquiring Firm was considering making a bid to acquire another organization (Target Firm), which provides related, but differentiated, information and analytics to institutional investment consultants, asset owners, and managers. Acquiring Firm needed insight into the institutional investment industry and potential growth opportunities for Target Firm’s offerings.

The solution

Acquiring Firm specializes in the securities marketplaces, market technology, and informational content and insight. This organization was connected with the head of Milliman’s mergers and acquisitions initiative, who in turn contacted Milliman’s investment consulting practice. He found that not only is the investment consulting practice a client of Target Firm, but one of Milliman’s senior investment consultants had actually been a colleague of Target Firm’s founders at a prior consulting firm in the 1990s. He’d been Target Firm’s first client and a member of its advisory committee, and has maintained a professional relationship with them ever since.

Milliman’s M&A head introduced the senior investment consultant to Acquiring Firm and arranged a contract under which Milliman would supply Acquiring Firm with “intellectual capital” about Target Firm and the overall institutional investment industry, and would then be available for advice and consultation as the bidding process to acquire Target Firm progressed. Acquiring Firm appreciated Milliman’s independence, in-depth industry knowledge, and unbiased advice, which they needed in order to develop a clear understanding of Target Firm’s history, evolution, current business model, and, most importantly, growth potential. There were several other interested parties considering a bid for Target Firm, so Acquiring Firm realized that Milliman’s clear and objective insight could provide them with a competitive advantage in the bidding process.

Through a series of conference calls and written summaries, Milliman’s senior investment consultant provided Acquiring Firm with insight into how and why Target Firm developed its initial product offerings, how their client base expanded and evolved, and how clients used and valued Target Firm’s services. Discussions also focused on competitors and other potential threats to Target Firm’s business, as well as trends in the institutional investment industry that could help or hinder Target Firm’s growth. The senior investment consultant accompanied Acquiring Firm’s team to a meeting with Target Firm’s senior management and investment bankers, during which he asked questions about Target Firm’s strategies and helped explain the context of industry-specific concepts that were discussed.

The result

Based on the knowledge they had gained through their due diligence process, Acquiring Firm made a well-informed bid for Target Firm. They based their bid on the sustainability of Target Firm’s franchise and on the revenue enhancement opportunities they envisioned as a result of combining their existing informational and analytical capabilities with those possessed by Target Firm. Acquiring Firm focused not just on expected synergies, but also on creative ways in which they could leverage the vast amount of information Target Firm could access to expand the scope of services provided to existing clients and to attract new clients.

With Milliman’s assistance, Acquiring Firm won the bidding and announced the acquisition of Target Firm. Both parties were very happy with the outcome—Acquiring Firm obtained a valuable and complementary business, and Target Firm obtained an informed acquirer that they knew had been advised by someone who understood their business very well.

From Milliman’s standpoint, this example illustrates the importance of our willingness and ability to use all available resources within the firm to add value for clients. The M&A team found just the right person within Milliman for the assignment, resulting in a win-win relationship.