Many asset management executives remain skeptical of M&A as a growth strategy, given the industry’s inconsistent track record of success in pulling off transactions. Asset management deals that have gone wrong often did so for one or more of three reasons:

• Wrong metrics: Many asset managers focused solely on scale or synergy as strategic objectives in M&A transactions. But size hasn’t led to success: more than half of the world’s 50 largest asset managers have recently grown slower than the industry overall. Making outdated capabilities bigger hasn’t increased competitive advantage for most investment managers. Cutting costs to improve margins hasn’t created the organic growth that most stakeholders in asset managers prize.

• Less experience: Unlike their peers in maturing industries that have faced decades of rising competition and growing consolidation, asset management leaders as a whole have less experience organizing highly complex mergers that require resolving significant overlaps in talent, operations, and clientele.

• Insufficient change: Fearful of upsetting talent, disrupting culture, or disturbing clients, many asset managers erred on the side of supporting duplicate costs — across brands, operations, personnel and distribution support — rather than make difficult choices that would support faster, more profitable growth across the long-term.

Asset management executives have learned from previous mistakes — theirs and others — and today’s M&A landscape shows signs of a more thoughtful, and likely more successful, approach to transactions:

• Creative structures: Rather than using old playbooks, asset managers now take more of a creative approach to structuring transactions. This includes involving multiple counterparties, jointly agreeing to shed uncompetitive capabilities, securing preferred distribution through stakeholders in the deal, and using the capital table strategically instead of solely for funding.

• Better preparation: Asset managers engaged in transaction discussions now spend equal time red-teaming proposed terms to ascertain things that might go wrong, as well as outlining blue-sky strategies that depend on everything going right.

• More data: Firms benefiting from successful transactions in asset management do so by measuring progress against multiple metrics — not just profits, but also organic growth, client retention and satisfaction, product launch success, and talent acquisition. Data provides these firms the ability to quantify their progress in a tangible way, and quickly discover post-merger issues before they grow into intractable problems.