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Independent firms will shape 2010 asset management M&A

M&A in the global asset management industry in 2009 was dominated by mega-deals, with a record nine transactions announced involving firms with more than USD100bn in assets under management.

Yet several deals in the fourth quarter signal a new phase driven by a greater number of transactions primarily involving independent firms, according to the financial institutions group of Jefferies. 

While 60 per cent of Q4 2009 asset management M&A represented divestitures – the defining theme in the past year – significant strategic deals involving independent firms such as Advisory Research’s sale to Piper Jaffray and Metropolitan West Asset Management’s purchase by TCW will help determine dealmaking activity in 2010, according to Jefferies.

This would mark a significant change from 2009, when only 61 independently-owned managers changed hands, the lowest level in more than a decade, and 57 per cent below the previous year’s tally.

“We expect divestitures to continue to play out through the first half of 2010 when the urgency of capital raising and strategic realignment of financial institutions should taper off,” says Aaron Dorr, a New York-based managing director within Jefferies’ financial institutions group. “We also anticipate aging owners of independent firms who missed the last bull market to seek to transact in 2010 given improving market conditions, asset flows and pricing.”

Deal volume in the October to December 2009 period totaled 30, compared with 45 announced transactions in the fourth quarter of 2008. Managed assets transacted fell to USD522bn from USD638bn a year earlier.

However, disclosed deal value jumped to USD6.5bn from USD4.0bn in the fourth quarter of 2008 – led by the Deutsche Bank/Sal. Oppenheim and Invesco/Van Kampen transactions. The median deal value was USD156m, compared with a median USD38m in the fourth quarter of 2008. 

For all of 2009, deal volume declined to 143 against 219 in 2008. Yet an all-time high USD4.0trn in assets under management changed hands, 51 per cent ahead of the total in 2006, the previous record year. By contrast, the 2008 tally was USD1.95trn in assets transacted. Total disclosed deal value in 2009 was USD24.9bn, up substantially from the previous year’s USD15.9bn.

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