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A S S E T
create less value. Particularly for
larger firms who tend to focus less
on trading and more on research or
analytics when looking to merge,”
Satten explains.
Headcount headaches
In some cases, particularly with the
larger mergers, it can mean traders
are at risk of losing their jobs
during a restructuring process. For
example, Standard Life Aberdeen
decided to cut around 800 jobs
following the completion of their
merger. The reduction in head-
count will be carried out over the
next three years and a statement
from both firms explained the cuts
would help the combined entity
achieve cost synergies through
restructuring where duplication
currently exists.
On the sell-side it’s a similar sto-
M A N A G E M E N T
M E R G E R S ]
ry. Shortly after Virtu Financial’s
acquisition of KCG earlier this year
it was revealed the headcount of
the combined entity was slashed
31% from 1,100 in December 2016,
to just 755 in August this year.
But this isn’t always the case -
especially on the buy-side - and
achieving efficiency and trade
automation doesn’t necessarily
mean a reduction in headcount on
the trading desks. Adam explains
the buy-side operates differently
following a merger and some of
Portware’s clients have auto-
mated their order flow by up to
50% without having to disrupt or
downsize the amount of traders
on the desk.
“Traders are valuable to the buy-
side and they don’t want to waste
the human capital if they can’t out-
perform an algorithm or a machine.
Instead, they will be placed on the
more difficult trades where their
skills matter the most,” Adam says.
The buy-side’s appetite for
consolidation is in its infancy and
experts agree should profits con-
tinue to fall while passive invest-
ing and regulatory requirements
continue to rise, the buy-side will
indeed continue to merge. As each
merger is completed, the real work
truly begins for those firms joining
forces. If desks are merged instan-
taneously, or nothing is done at all,
the consequences could be severe.
Despite its challenges, integrat-
ing trading desks after a merger is
truthfully an opportunity for the
asset managers to overhaul, update
and streamline trading workflow
to achieve those sought-after cost
synergies, efficiencies and trade
automation.
“Two firms simply won’t come together and
seamlessly integrate, a merger of desks is about
the dialogue of finding the best process.”
ANONYMOUS HEAD OF TRADING
32
TheTrade
Autumn 2017