The credit crunch could leave some money management subsidiaries available for mergers and acquisitions as large financial firms start to shed all or part of their asset management businesses to raise capital.
Buyers likely will be smaller money managers, possibly alternative investment firms looking to round out the strategies they offer or others that need to boost their back-office or distribution capabilities, industry experts said.
“Any dislocation in the markets creates opportunities,” said Kevin Quirk, partner at Casey, Quirk & Associates LLC, Darien, Conn. “At the same time, firms in a bit more of a distressed position will look to partner with someone else.”
Officials at large asset management firms have spotted opportunities. In February, Marna Whittington, chief operating officer of Allianz Global Investors, Munich, said in an interview that the credit crunch has created attractive buying opportunities and that Allianz officials are “quietly looking” for acquisitions. She declined subsequent comment for this article.
Laurence Fink, chairman and chief executive of BlackRock Inc., New York, said in an earnings call April 16 he expects to see dramatic consolidation in the investment management business as companies “look to embellish their capital through other sales of their asset management business or contributions into their asset management business,” he said. Calls requesting additional comments were not returned.
“There are buyers that have an opportunity to take advantage of firms that are struggling, particularly in the alternative space,” said Erika Cramer, managing director and partner at Silver Lane Advisors, New York, an M&A investment bank and strategy consulting firm.
She added that the credit crunch has prevented some alternatives firms from leveraging deals the way they did in the past. On the other side of the equation, alternatives companies that were not hurt by the crunch are in a good position to pick up the more traditional assets being sold off by larger firms, she said.
The first quarter 2008 has been a busy one for money management M&A, with 53 deals announced, the highest number during the first three months of any year, according to data from investment bank Jefferies Putnam Lovell, New York, a division of Jefferies & Co. The acquired assets under management totaled $704.6 billion, with a combined disclosed deal value of about $9.6 billion.