Australia is a country set for an unprecedented boom in wealth over the next 40 years, as the huge payout from the resources boom trickles down. The stakes are high in the battle for Axa and this is nearly endgame in Australian wealth management, but we’ll have to wait a while for a winner.

It’s feeding time in Australia’s wealth management industry and the biggest predator from the current frenzy will emerge as the master of the country’s envied compulsory retirement savings scheme.

As the pace of consolidation marches on, the number of potential targets is shrinking. That is why AMP’s A$12.8 billion ($13.4 billion) bid for the Australian and New Zealand assets of French company Axa Asia Pacific is so important: it presents almost as AMP’s last chance to achieve the scale it needs to leapfrog the Big Four banks and challenge them in the mass market wealth management space.

Last week, NAB launched a A$4.61 billion offer for Axa’s Australasian assets which the domestic bidders view as the main prize, but since then the market has moved considerably. The NAB bid is actually at A$13.3 billion, but it is dependent on Axa’s French parent - which has 54 per cent of Axa Asia Pacific - stumping up just over A$9 billion for the subsidiary’s Asian wealth management assets.

Axa Asia Pacific might have a French name and a majority French shareholding but it is still essentially the old Australian mutual National Mutual, taken over in the 1990s after demutualisation and listing.

Since the NAB bid, shares in AMP – which has an exclusive right to negotiate with Axa until February 6 – have risen on the basis that many see it as a takeover target if it fails to win the fight. Shares in NAB have fallen while those in Axa Asia Pacific are rising, given that it is so sought after. The result is a fluid situation which won’t be resolved for some time.

It is also a scenario which could involve new bidders.  ANZ Banking Group, which has also been on the wealth management acquisition trail recently  – both at home and in Asia –  was tight-lipped about whether it could enter the fray with a new bid, following its A$1.76 billion deal to buy out former funds management joint venture partner ING.

“Quite clearly we have a strategy to grow out wealth management but we have to bed down our ING acquisition first,” ANZ chief executive Mike Smith said last week.

“I’m not going to comment on AMP. It would be inappropriate with all this stuff going on. All I’m telling you is that wealth management is an important part of our business.”

There are rumours swirling even the Commonwealth Bank of Australia has been mentioned as a potential counter-bidder, not just for Axa but also perhaps for AMP, given that Axa is purchased by a rival.

Consolidation

Axa’s purchase would be the culmination of a decade of consolidation in Australia’s wealth management industry, which has seen so many established names subsumed by the Big Four banks.

Westpac grabbed the local Rothschild business, and then BT. The CBA bought Colonial First State, while the NAB bought the old MLC. These were established businesses with long histories in Australian wealth management. Along the way, the majors also gobbled up significant state-based retail banks, which also had nascent wealth management businesses.

If Axa falls and AMP is not the victor then the old mutual will itself become vulnerable, and there are a shrinking number of other targets out there to pursue if it wants the scale to challenge the all-conquering banks.

Start watching the share price of Queensland-based Suncorp or even IOOF (once the fabulously named Independent Order of Odd Fellows) itself grown bigger last year through a A$540 million merger with Australian Wealth Management.

There is a lot at stake. Australia’s funds industry is a global phenomenon. A country with a population of 20 million has the world’s fourth largest funds management industry, with over A$1 trillion under management.

This is a country set for an unprecedented boom in wealth over the next 40 years, as the huge payout from the resources boom trickles down. The stakes are high in the battle for Axa and this is nearly endgame in Australian wealth management, but we’ll have to wait a while for a winner.