Brookfield ‘actively monitoring’ M&A flow as private equity consolidates

Brookfield Asset Management is eyeing M&A opportunities arising from “broad-based” consolidation across alternative assets, according to the firm’s president.

“We continue to see consolidation among alternative asset managers and… we’re actively monitoring a number of situations,” , Connor Teskey said on the firm’s third-quarter earnings call on Monday. “But… we’re going to continue to be very, very selective.

“We have a great business that has a fantastic organic growth trajectory. And while we’re monitoring a number of situations, we’ll only pull the trigger on ones that are additive to our business, accretive to our cashflows and really round out our product suite and give us something that we don’t already have.”

The comments come two months after Brookfield revealed it was considering acquiring a secondaries firm to bolster its offering and tap into widening interest in the strategy among investors. The firm identified secondaries as one of four verticals it could target when looking at an acquisition, according to materials from its investor day presentation in September. The other verticals it identified were technology, healthcare and consumer brands.

Brookfield has close to $3 billion in balance-sheet capital to deploy to near-term initiatives, including “something strategic on the acquisition front”, CFO Bahir Manios added.

Consolidation in private equity and other alternative assets is today being spurred on both the LP and GP sides, Teskey said. “Similar to what we’ve been seeing for years, increasingly clients are concentrating their capital with large-scale, reputable managers that can offer them a full suite of products and solutions. No doubt Brookfield has been a beneficiary of that.

“The trend toward consolidation is also being driven by the managers themselves. Increasing requirements in compliance and the required level of customer service is much easier to do when you’re part of a scaled manager that can amortise the cost and requirements of those functions across a much broader business.

“For smaller-scale managers, having a large depth of talent, a large number of men and women to choose from, also helps with succession planning. And that’s a driver of consolidation in the space as well.”

In 2019, Brookfield bought a majority interest in Oaktree Capital Management, enhancing its exposure to credit. Oaktree acquired a majority stake in preferred equity and NAV loans specialist 17Capital last year.

Of the $61 billion of Brookfield capital raised so far this year, more than 40 percent is attributable to credit and insurance, Teskey said on the earnings call.