M&A activity in the money management industry hit an all-time high last year, with buyers spending nearly $44 billion to acquire 191 firms with $2.6 trillion in assets under management, according to a new report from investment banking firm Putnam Lovell NBF Securities. The previous record was 159 deals in 2004, and the former record valuation was $31 billion in 2001.
The difference between 2006 activity and that of previous record years is that "last year's deals have staying power," said Ben Phillips, managing director and head of strategic analysis at Putnam Lovell in an interview. "In the late '90s, buyers gorged on ideas; now they are more focused on product and development."
He cited the two largest deals of the year, BlackRock's acquisition of Merrill Lynch Investment Managers and Bank of New York's December purchase of Mellon Financial. Both illustrated how investment managers are using acquisitions to "shift their mindset" away from a focus on traditional pension plans. "If you're an institutional manager, you will need to find ways to access retail and high-net-worth investors," Mr. Phillips said.
Alternative investment deals also helped propel 2006 to record levels. Roughly one-third of the deals involved alternatives, representing managers with a combined $175 billion in assets under management.