Investment management is the ticket to success in financial services today. Everybody wants a piece of the action—and for good reason, it seems. The US mutual fund business has grown by 19 percent per year over the past five years, while the white-hot 401(k) market has expanded at 14 percent a year. Even the supposedly mature defined benefit market continues to grow at an annual rate of 6 percent, despite negative real cashflow.

And just look at the returns. Management fees in mutual funds have risen rather than fallen over the past decade, in spite of massive inflows to the industry. Successful institutional managers enjoy ROEs of over 40 percent. Is it any wonder that so many companies want in?

The desire to enter or grow has led to unparalleled M&A activity. In 1995, over 80 deals were completed in investment management, at an estimated total value of $6 billion. In 1996, more than 70 deals worth in excess of $10 billion were completed.

Many look to acquisition to meet a genuine need, but there is no guarantee that the expected gains will materialize

For many established players and for those seeking to build a position in investment management,...