NEW YORK - The consolidation trend in the financial services industry continued unabated in 1993, according to the annual survey by Berkshire Capital Corp.
Berkshire's annual Investment Management Industry Overview reviewed 53 transactions worth $4.1 billion announced in 1993. That figure easily topped 1992's record pace of 48 mergers and acquisitions totaling $3.2 billion.
Banks emerged as top acquirers of assets, including the largest transaction announced last year, the $1.8 billion acquisition of Dreyfus Corp., New York, by Mellon Bank Corp., Pittsburgh.
The banks have established a momentum that is expected to continue as they build up their fee-based businesses, according to the survey.
"The banking system has emerged from two years of wrenching change and consolidation," said the survey. "The fallout has been restored bank liquidity and balance sheets, and in some cases the appearance of large and capable trust and investment groups that have been pieced together out of interbank transactions."
Commercial banks and trust organizations were the acquirers in 12 of the 53 acquisitions, outpacing mutual fund organizations, which were buyers in nine transactions. Institutional managers were buyers in six deals, as was United Asset Management. Securities and brokerage firms participated in five acquisitions. The remaining deals involved real estate managers, management buy-outs, joint ventures and insurance companies
The ranks of the sellers were dominated by institutional managers, which were acquired in 26 of the transactions, followed by mutual fund managers, in 12 other transactions. The other sellers were trust organizations, personal managers, real estate managers and others.
The growth in registered investment advisers and mutual fund assets is spurring activity in those segments, according to the Berkshire survey. The number of domestic registered investment advisers has grown at a rate of 6% annually since 1989. The number of mutual funds has grown 8.9% since 1991, and aggregate assets under management have grown 20.3% in that period.
Transactions involving mutual funds and profitable separate account managers achieved valuations at the high end of the pricing scale, with average prices of 4.73 times their investment management revenue and 3.39% of assets under management. At the lower end - dominated by real estate investment managers - prices were 0.2 times revenue and 0.11% of assets.
One unusual trend noticed in the survey was the downturn in acquisitions by foreign companies; the number of such acquisitions dropped by half, from 12 in 1992 to 6 in 1993, and three previous joint ventures were terminated. Bad economic news in Europe and Japan largely was responsible for the drop, according to the survey.
The largest purchase done by an overseas company in the United States last year was the acquisition of real estate manager Yarmouth Holdings Ltd. by the Australian company Lend Lease Corp.