Description:
Considering merger and acquisition of managed funds as two distinguishable undertakings, this paper presents measures to assess overall prospect for merger and overall prospect for acquisition separately. Merger and acquisition gain are computed with improvement in the rankings of funds based on data envelopment analysis assessed relative performance. Improvement in the ranking is measured on an ordinal scale. Overall prospect is determined by aggregating level of improvement in the rankings of funds associated with all prospective mergers and acquisitions. A prospective merger satisfies certain conditions on pre- and post-merger performance of merger partners. Prospective target funds are selected similarly but satisfying different conditions. Results based on 2021 annual cross-sectional data in a sample of Australian superannuation funds reveal that industry funds, on average, have more merger prospects and acquisition prospects within their own type compared to other fund types; retail, corporate and public sector. Corporate funds have no prospect for merger and acquisition within their own type. These results are consistent with activity in this space in the past decade. Moreover, number of prospective mergers (acquisitions) and degree of overall prospect for merger (acquisition) reveal merger (acquisition) opportunity from two different standpoints. Prior to making merger/acquisition decision, a fund manager may obtain a short-list of funds from prospective transfer-receiver/acquirer-target pairings. Degree of overall prospect for merger and degree of overall prospect for acquisition of funds indicate overall prospect to merge/acquire within the managed fund industry and that would be of interest to policy makers