Sandler O'Neill: 29 large-manager M&As in 3rd quarter

Twenty-nine M&A transactions involving targeting money management firms with at least $500 million in assets were announced globally in the third quarter, down slightly from 31 transactions in the second quarter and 30 in the third quarter of 2011, according to a report Tuesday by investment bank Sandler O'Neill & Partners.

Despite the decline, the assets under management of acquired firms increased to $478 billion, up 45.3% from the previous quarter.

According to the report, deal-makers are proceeding with caution despite the overall market increases in the third quarter aided by QE3, because of continued unease regarding the long-term effectiveness of quantitative easing in the U.S. and Europe.

Two-thirds of transactions involved sellers managing assets of less than $5 billion.

Aaron H. Dorr, managing director and head of asset management investment banking at Sandler O'Neill, said in a telephone interview that deals have been more tactical than transformational, a continuing trend from the last couple of quarters, with firms trying to “plug holes and (identifying) acquisitions to address current market opportunities.”

“We have a healthy amount of financial services firms of all sizes and stripes trying to streamline their businesses,” Mr. Dorr said.

Two transactions, the sale of a minority stake of Janus Capital Group to the Dai-ichi Life Insurance and Societe Generale's divestiture of TCW Group to Carlyle Group and TCW management, accounted for $153 billion and $127 billion in AUM, respectively, and combined for 58.6% of the total.

The next-largest transactions were Julius Baer's acquisition of Merrill Lynch's international wealth management business from Bank of America, at $84 billion in AUM; Strategic Investment Management's sale of a majority stake to Friedman Fleischer & Lowe, at $30 billion in AUM; and the $157.4 billion Florida State Board of Administration's acquisition of a minority stake in Providence Equity Partners, at $21 billion in AUM.

Large transformational acquisitions could wait until after the elections and the new year,Mr. Dorr said.

“Until we have more solid ground under foot no one wants to do the transformational deal,” Mr. Dorr said.