The market for investment management firms may be cresting this year, according to a study by investment bankers Cambridge International Partners, New York.
Cambridge's analysis notes evidence that price tags might be topping out, even though it says the high level of merger activity among money managers will continue as strategic pressures rise on midsized firms and a whole generation of founders nears retirement.
The report noted multiples for large private transactions have risen annually for several years to a range of 9 to 11 times cash flow in 1996, but Cambridge "saw the first evidence of buyers balking at paying prices at this level."
Many managers see the market as fully valued, given their profit projections, said the Cambridge study. A strong stock market, low interest rates, increased cross-border investments and interest in money management among financial institutions all spurred buyers in 1996. But the report concludes that a slide in any of those factors could force prices down.
Mercedes M. Cardona