The pace of consolidation in the super industry has increased over the past 12 months, but the size of the deals is lower than those reported in last year’s trend for ‘mega-mergers’, KPMG’s new sector report has found.

There were 15 mergers/alliances announced to the market in the year to October 2021 – the most activity ever seen in a single year. But following the activity of 2019-20, which was characterised by large-scale, like-for-like, fund mergers, 2021 has seen a greater number of smaller funds consolidate into Australia’s largest incumbent superannuation funds.

In 2020, the report shows, the average size of transferring fund was $38bn. In 2021, that shrank to just $4bn. By contrast the average receiving fund size this year was $76bn, up from $44bn in 2020, illustrating the trend to large funds hoovering up smaller ones.  

The analysis, which looks at 10 years of merger activity (2011-21), finds that while consolidation activity has taken place across all fund types (Corporate, Industry, Public Sector and Retail) industry funds have been clear leaders in numbers of mergers, both as Transferring and Successor (receiving) funds.   

David Bardsley, KPMG Superannuation Advisory Partner, said; “We expect this year’s trend of smaller funds consolidating into larger funds to continue. Currently, many funds are faced with the challenges arising from a lack of scale – and they are proactively investigating possible merger options in order to improve outcomes for their members.

“APRA is concerned about proposed transactions where the resulting successor fund would have less than $30bn funds under management (FUM) and this regulatory focus is another driver towards smaller funds being consolidated into large funds instead.”

“We expect there to be fewer mega fund merger announcements, following realisation from Boards and Management of the significant transition planning and integration activity required in order to complete a merger transaction. So-called “bus stop” transactions are deemed less likely to deliver sustainable medium- and long-term benefits and mega funds look to deliver on the promise of past consolidation transactions.”

The KPMG report also contains a survey of 500 fund members to gauge their awareness and understanding of fund consolidations. It found that just 20 percent of members of merged funds were actually aware their fund had merged. These people tended to be the most active and engaged members and they were satisfied with the amount of communication received.

Of those members aware of their funds’ merger, 50 percent reported at least monthly contact with their fund (either communications received from the fund, or contact made by the individual). By contrast, only 21 percent of members who were unaware of the transaction -or members of a non-merged fund – had similar frequency of communication with their fund.

In these groups, communication on a quarterly basis (or even less frequently) is most likely, with 25 percent engaging with their fund less than once every 6 months.

David Bardsley said: “The survey found that a majority of the engaged members were positive about possible future fund consolidation, while the others were more likely to be neutral. Those surveyed also reported a modest but positive improvement in their satisfaction with investment returns and products offerings following the completion of a merger.”

“There is a strong and proven link between regular, effective engagement with members and transaction awareness. Funds need to continue to build engagement across the entirety of their membership to build awareness of transactions and the potential impacts to their members.”

Lessons from previous mergers

The report also contains interviews with some of the leading players in the sector, to share lessons from previous mergers. These included:

  • Start with the end in mind: Merger activities create potential significant opportunity cost to funds, especially if the proposed transaction does not proceed. Striving for stronger member outcomes creates an impetus for funds to carefully consider target merger partners, clearly define strategic principles and identify potential challenges and complexities early.
  • Importance of effective change management: During consolidation activities staff and trustee board members often experience apprehension, including a lack of clarity regarding their role in the go forward entity. Furthermore, funds need to provide their members with clarity on what impact(s) and benefits they can expect following the transaction. Effective communications, as well as strong program and change management is required.
  • Balancing the transaction and core business: Delivering a complex transaction whilst maintaining service levels and delivering BAU projects requires a substantive investment of time, financial resource, and staff’s emotional energy from both funds. To deliver this, funds need to balance strategies, prioritisation, and leverage learnings from past transactions.
  • Realistic transaction roadmaps: As transaction challenges and complexities emerge, milestone dates are quickly put under pressure. To ensure effective transaction delivery, funds need to be able to respond with agility to emerging issues, adjust their delivery tempo and ensure they have allocated adequate contingency.


For further information

Ian Welch
KPMG Communications
+61 400 818 891