MERGERS
When two become one BY CHRIS DASTOOR
With dozens of mergers having already taken place, the industry is starting to find it has a refined, formulaic process for consolidation.
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While it seems the superannuation industry is going through merger-mania, it has long been the call by the prudential regulator that there are too many funds. Even recently in a speech delivered to the Financial Services Council (FSC) in October, Australian Prudential Regulation Authority (APRA) executive board member, Margaret Cole, said the number of funds and investment options remained so large that it was “detrimental” to members. APRA stated that it expects anything less than $30 billion in funds under management (FUM) would be too small to compete. However, it also warned against trustees rushing into poorly-planned or sub-optimal mergers. There were many factors to consider when finding a merger partner, including member needs, workplace cultural fits, investment philosophy and demographics. Because of this complexity, it was now common for super funds to employ teams solely to organise and assess potential mergers.
Identifying merger partners It takes two to tango and without identifying an appropriate partner for a merger, the process is doomed to fail. In the case of Aware Super, AustralianSuper and Spirit Super, all three funds were the result of multiple mergers. In 2012, First State Super (established in 1992 for NSW Government employees) merged with Health Super, a health and community services-focused fund. In July 2020, First State Super merged with VicSuper and officially become known as Aware Super. In December 2020, Aware Super completed its merger with WA Super. In July 2021, Aware announced it had agreed to merge with the Victorian Independent Schools Superannuation Fund (VISSF). Michael Dundon, Aware Super executive consultant – corporate development, was formerly chief executive of VicSuper and now looked after the merger team at Aware Super. He was also acting chief operating officer (COO) as current COO, Jo Brennan, had taken
more responsibility over the platform transformation project. As CEO of VicSuper, Dundon said the fund had been exploring merger opportunities due to the belief that a $25 billion fund with 250,000 members was not going to be large enough for the future industry environment. “Organic growth was not going to give us scale benefits that we wanted and we were looking at larger funds – the $100 billion plus who were delivering a broader range of services and better investment performance all at a lower cost to members,” Dundon said. “Our view from a strategic perspective was we really needed to find a merger partner that would allow us to access those scale benefits quickly. “Looking through the industry at the time, our focus was on a fund that was like-minded culturally, strategically, and in a [similar] demographic.” Dundon said First State Super was the logical fit and it was a nice compliment to match a large Victorian and New South Wales fund together.
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