Money manager M&A up 14% in quarter, report shows

Money manager merger-and-acquisition transactions in the first quarter totaled 41, up 14% from a year earlier, with $671 billion in assets under management involved, more than double the year-earlier number, according to a quarterly report Thursday from Sandler O’Neill + Partners.

Still, the number of transactions last quarter was down from 45 in the fourth quarter, when manager M&A deals involved $327 billion in AUM, said Christopher Browne, managing director at Sandler O’Neill.

“The fourth quarter had a lot of activity, which it always does,” Mr. Browne said, but the number was even higher because deals were made in anticipation of future tax hikes.

Many of the deals announced in the first quarter were in the pipeline last year and were helped along by the strong equity markets in the first three months of the year. “Had the S&P (500) been down 10% last quarter instead of up, there wouldn’t have been as many deals,” he said.

Rabobank’s Feb. 19 sale of Robeco Groep to Orix Corp., involving $244 billion in AUM, was the largest transaction based on assets transferred in the first three months of the year, followed by Investec’s March 14 sale of a 15% stake in Investec Asset Management, with $103 billion in AUM, in a management buyout; Artisan Partners (APAM) Asset Management’s March 7 IPO, involving $80 billion in AUM; and AXA’s March 25 sale of a majority stake in AXA Private Equity to management and external shareholders, involving $31 billion in AUM.

Overall, manager transaction activity was driven by a rise in divestitures as financial institutions parted with non-core asset management businesses, and continuing deal activity involving independent sellers seeking strategic partners, according to the report.

Transactions involving alternative asset managers continue to represent a significant portion of overall deal activity, at 39% of announced transactions in the first quarter. The transactions were largely strategic deals and were a healthy mix of direct and funds-of-funds managers.

Divestitures spiked during the quarter and accounted for the majority of sales at 51%, up from 40% in the fourth quarter of 2012 and at its highest quarterly level since the third quarter of 2011.