What are the main choices in building a global franchise in the asset management industry? Why have U.S. and European firms typically taken different approaches to building such a global franchise?

In building a global franchise in the asset management industry, a firm has a few main choices – grow internally by establishing different product lines across the world, acquire asset managers with established businesses in various countries, or develop strategic alliances with financial institutions headquartered in different foreign markets.
The largest U.S. fund managers – Fidelity, Vanguard and Capital Research – have chosen to grow abroad through internal expansion. In part, this choice was driven by the fact that none of these three managers is publicly owned; thus, they do not have stock to use in acquisitions. In addition, this choice was driven by the tightly knit culture of each of these three firms, combined with their substantial resources to establish their own foreign offices. The foreign acquisitions by most other U.S. fund managers have been designed to fill out product lines by buying niche players in Europe – for example, Legg Mason's acquisition of Johnson Fry. The big exception is Merrill Lynch's acquisition of Mercury, which is one of the most important players in the U.K. asset management industry and also has a significant position in the Far East. This large acquisition was motivated by Merrill's objective of quickly becoming a global player in asset management.
By contrast, foreign financial institutions have generally relied on acquisitions as the main way to build a global franchise in asset management. Thus, we've witnessed an explosion of transaction activity during the late 1990s and 2000, involving many of the largest European banks and insurers. In review question #6, we've discussed why these European financial institutions wanted to expand into the U.S. asset management industry. But why through acquisitions rather than internal expansion or strategic alliances? The answer lays primarily in the incredible strength of existing U.S. players in the U.S. market and abroad. As a result, it would be very difficult for a European financial firm to make a big splash on its own, especially because these firms had little U.S. retail presence in other financial sectors. For similar reasons, many U.S. fund managers have not been interested in broad strategic alliances with European financial firms (as opposed to working together on a niche product like a Euro-currency fund).