Money manager M&A deals rise 6.8% in 2012, Sandler O'Neill says

Global money manager mergers and acquisitions announced in 2012 totaled 141, with total assets under management transacted at $1.5 trillion, according to Sandler O'Neill.

Announced manager M&A deals were up 6.8% from the 132 announced deals in 2011 and 10.1% above the 128 in 2010, according to Sandler O'Neill's Asset Manager Transaction Review.

AUM transacted in 2012 was up 16% from 2011 and 50% from 2010.

Measured by assets under management, the five largest transactions announced in 2012 were:

  • Janus Capital Group's sale of a minority stake to Dai-ichi Life Insurance, $153 billion;
  • The Carlyle Group's IPO, $147 billion;
  • The sale of TCW Group by Societe Generale to a fund of The Carlyle Group and TCW management, $127 billion;
  • Bridgewater Associates' minority stake sale to the $112.4 billion Texas Teacher Retirement System, Austin, $120 billion; and
  • The sale of Dexia Asset Management by Dexia SA to GCS Capital, $100 billion.

Improved global stock markets, fears of expected tax hikes and the sale of non-core businesses by financial institutions drove the 2012 increase in transactions, said Aaron Dorr, managing director and head of asset management investment banking, in a telephone interview.

Deals involving targets with AUM of $1 billion to $10 billion totaled 84 last year, or 60% of all deals, the highest 12-month proportion of total deals on record, according to the report. The previous high was 2010, with 57%, followed by 1997 with 51%.

Seventeen deals were made with $10 billion to $100 billion in AUM transacted, down from 27 in 2011, while five deals involved firms with more than $100 billion in AUM transacted, up from two.

Money managers were the acquirers in more than 50% of all transactions, the first time that this percentage exceeded 50% since 1998, as larger financial institutions continue to be net sellers of money management businesses.

As in 2011, 39% of deals involved alternative managers as sellers. Unlike 2011, however, transactions in hedge funds of funds (to 15 from six last year) and private equity (to 10 from seven) propelled the increase, while sales of hedge funds slipped to 14 from 16 and CLO managers, to seven from 13. This reversal reflects current industry trends, including the consolidation in the hedge fund-of-funds industry.

Interest among foreign buyers in European managers was expectedly low, with 80% of all such transactions coming from European buyers; that's up 50% from 2011. However, Europeans also sought opportunities in the U.S., with purchases there increasing to 10 in 2012, from three in 2011.

Pure-play money managers benefited from decreased competition for acquisitions in 2012, a trend likely to continue this year, Mr. Dorr said. “Pure-play asset managers will continue to be dominant in transactions in the coming year,” he said. “We haven't seen any signs that banks, insurers and broker-dealers are going to become more active buyers in the coming year, and the pool of asset managers looking to grow through acquisition continues to grow.”