AMP suitors will face a tough time untangling the complex and interconnected parts of the wealth manager’s sprawling business, plus the enormous costs of separation.

Mr Lim said while the major banks would unlikely be able to purchase AMP Bank because of competition regulations, Macquarie Group, Bank of Queensland or IAG would make a suitable home for the fast-growing lender.
“It will be useful to Macquarie or Bank of Queensland, which could bulk it up with their Virgin Money business,” Mr Lim said.
Macquarie and Bank of Queensland declined to comment, but sources said the assets would remain attractive for the right price. Bank of Queensland recently hired Craig Ryman as its new chief information officer, after the executive had spent more than five years in the same role at AMP.
One issue, according to those dealing with the sales process, is that untangling any division will be a costly and drawn-out affair.
AMP sunk $400 million into the cost of separating its troublesome life insurance division over the past year. The net sale proceeds from the $3 billion deal with Resolution Life were only $965 million.
JPMorgan analyst Siddharth Parameswaran said there was likely more value in AMP being broken up and sold than being maintained as a conglomerate.
“A sum of the parts valuation scenario implies AMP is trading at a 21 per cent discount,” Mr Parameswaran said.
However, there were a number of “constraints” to disentangling the businesses, he said. This included that AMP Bank and the wealth division may need to be sold as a package as a significant portion of the bank’s funding came from deposits provided by wealth management customers. The lender’s deposit-to-loan valuation of 81 per cent is very high compared to similar banks, mainly because of the funding link with the superannuation division.
“This may make it harder for some buyers to consider taking an ownership stake, particularly private equity who may shy away from equity capital heavy businesses like the bank,” Mr Parameswaran said.
“The New Zealand business already had no satisfactory offers when AMP tried to dispose of it,” he said.
One superannuation executive said AMP’s pensions business would need a significant capital injection in order to compete with both industry funds and for-profit retail funds. “It’s going to take money and time,” the executive said.
Private equity group KKR has shown interest in part of AMP’s wealth management arm, while Macquarie was previously interested in parts of the AMP Group.
But Alex Dunnin, head of research at consultancy Rainmaker, said the company was worth more as a whole than sold for scraps.
“Regardless what you think of AMPs current share price and its recent woes, it nevertheless commands some extraordinary assets,” Mr Dunnin said.
“They are Australias third largest funds manager, second largest platform group, largest financial planning group and one of the largest self-managed super fund administration groups. This is an amazing network of businesses,” he said.
“But scale and power isnt about size, its about how well the component parts fit together and play off and magnify each other. It should be a gestalt where the whole is bigger than the sum of the parts.”