Amcore Financial Inc.'s sale of three of its Vintage Funds with $164 million in assets to Federated Investors Inc. was an example of a smaller deal that was influenced by Amcore's desire to separate its manufacturing and distribution operations.
"Generally, these types of deals were driven by the strength of the overall business, and not just external pressures," said Paul Holt, president and founder of Cambridge International. "We think it will continue to be a theme for both large and small firms alike, but it will be just one of many themes."
Mr. Holt pointed out that a number of other deals that took place last year were the result of money managers that sought to expand further into alternative investments.
Roughly 20% of the M&A activity last year involved the acquisition of an alternative investment firm, according to Cambridge. While that figure is down slightly from 2004, when alternatives were responsible for 24% of the total deal activity, a number of money management firms have still been shopping for hedge fund and fund-of-funds managers.
Perhaps the most notable alternative transaction of the year again involved Legg Mason, which acquired an 80% stake in the Permal Group for $800 million. Permal, which had roughly $19.3 billion in assets under management when the deal was announced in June, is one of the top five hedge fund-of-funds managers in the world, according to Cambridge.
"We also see that there is significant and continued interest from money managers to get in the alternatives game," said Eric Weber, chief operating officer and principal of Freeman & Co., a New York-based boutique investment bank.
Freeman & Co. served as the adviser to Guggenheim Alternative Asset Management, which sold 72% of its ownership to the Bank of Ireland for $184 million last month, the ninth largest of the year. "Structuring these types of deals can be difficult because you need to find a way to make sure that the hedge fund owners stay incented and still have a significant stake in the business," said Mr. Weber. "There are more deals getting done now that should prove to be the framework to allow more alternative deals to take place in the future."
John Temple, managing director at Cambridge, also added that roughly 10% of the total deal activity came from Israel, where regulators have required the country's banks to shed their mutual fund operations.