This time last year, UBS was embarking on its takeover of the distressed Credit Suisse. Understandably, this slowed its pursuit of other M&A targets. However, the bank is now ready to target larger wealth management firms.

UBS CEO Sergio P. Ermotti recently spoke at the Morgan Stanley European Financials conference. He sees the bank targeting US wealth managers for acquisitions in an effort to boost the profitability of this division. His goal is to narrow the gap between UBS and its rivals following a 72% decline in the unit’s Q4 earnings. 

However, many are skeptical about UBS’ strategy given the aggressive moves made by competitors in the last few years. According to Larry Roth, the managing partner at RLR Strategic Partner, “UBS could be late to the M&A party, which already has significant, well-run firms that are having success in this area.” Further, attractive targets are likely to have multiple bidders and rich valuations. 

Another concern is that there is no guarantee that these large acquisitions will work. A recent example is UBS’ attempted purchase of Wealthfront for $1.4 billion in January 2022 with the intention that it could help the bank recruit Wealthfront’s younger clients. The deal was scrapped by regulators and shareholders. 

Acquisitions are essential for UBS to fuel growth, given its challenges in retaining talent. UBS's advisors generate more than $1 million in average annual revenue and fees. This makes them an appealing target for RIAs or independent broker-dealers with more earnings potential. 

Finsum: UBS is betting on a more aggressive M&A strategy to bolster its US wealth management division. Yet, many believe that the bank’s efforts may not succeed given higher valuations for attractive targets and recruiting challenges.