Schroders’ bid for Cazenove Capital could appear an extreme reaction to the departure of one fund manager, but could signal the start of more activity in the investment management sector.  There is nothing to suggest it was not in the former’s thinking before fund manager Richard Buxton handed in his notice.

It could hint at some encouraging trends, both in the investment management industry and the wider corporate world.

The £424m deal brings together two of the City’s oldest fund management groups and is the first significant ‘strategic’ merger and acquisition activity seen in the investment management fund world for some time. Whilst there has been some consolidation around, its not been enough to excite the investment bankers. Henderson Global Investors’ deals for New Star and then Gartmore, could have been seen as distressed purchases but Cazenove however is currently firing on all cylinders.

This positive activity will be good for the fund management industry as it indicates some long-awaited consolidation is starting to happen. One thing is for certain that the active investment management industry needs to become more efficient to protect itself from the threats posed by passive investment propositions.

The finer details of the merger has not been finalised but indications suggest key Cazenove managers such as Julie Dean, Paul Marriage and John Warren are bought into the deal. It also appears that the Cazenove funds’ investment process, objectives or performance targets will remain unchanged.

Beyond the world of investment fund management, the deal should deliver Schroders with valuable private banking and charity strings, although perhaps most important of all is what the deal implies about UK companies’ propensity to spend. Schroders, in defiance of shareholder pressure, has long been sitting on chunky cash balances. The Cazenove deal hints at a change of mood so, where it leads, will others follow?

A fundamental headwind to growth in the UK has been the unwillingness of companies to invest the cash that has been sitting on their balance sheets, either in new hires or new businesses. If Schroders – which, it might reasonably be assumed, knows a thing or two about the economic climate – believes it is the right time to buy, perhaps the outlook for the future really could be a little more upbeat.