Some asset managers looking for a buyer might find themselves sitting on the shelf longer than they expected.
Friends Provident PLC, for example, has been trying since January to unload its 52.5% stake in F&C Asset Management PLC — one of the oldest London-based money managers with £96.5 billion ($177 billion) in assets under management as of June 30. But after eight months, no takers have come forward.
Banco Santander SA, Madrid, also is considering a sale of its asset management division to focus on its core business of retail and commercial banking. A buyer is not likely to surface this year, according to analysts.
“This could take some time,” said Diego Barron, a banking analyst at Fortis SA based in Madrid who covers Santander. “The current market condition isn't exactly the best from a seller's perspective.” Santander had €136 billion ($200 billion) in assets under management at year-end 2007.
If economic conditions remain dire, managers left on the selling block for too long could see their businesses severely weakened.
“For the most part, investors and consultants don't like managers that are being bought or sold,” said Kevin J. Pakenham, managing director at Jefferies Putnam Lovell based in London. “They tend to put them in a penalty box while the process is under way.”
Asset management firms, particularly specialists with attractive growth potential and good track records, are still in high demand, said Aaron Dorr, New York-based managing director at investment bank Jefferies Putnam Lovell. Cross-border asset gathering capabilities, particularly in emerging markets within the Middle East and Asia, are also highly sought after.
“There's always a place for good products with good performance,” Mr. Dorr said in a telephone interview. “But buyers have tended to be more cautious and diligent. In times like these, they really want to make sure that they're placing their strategic bets in the right places. The threshold for doing a transaction has become higher as capital has become scarcer.”
Sources familiar with F&C said the company is much more of a traditional multiasset house with a U.K. bias, and therefore not as attractive to buyers. And, in the case of Santander, which has distribution advantages in Spain, the U.K. and Latin America, a merger might prove too complex and expensive for many potential suitors in current market conditions, according to sources who asked not to be named.
The average price paid for listed asset managers, as measured by price-earnings ratios, plunged to its lowest level in almost six years as of the end of June, according to a Jefferies Putnam Lovell report. The Jefferies Putnam Lovell Asset Management index, which comprises 71 publicly traded money managers globally, fell 20% in the first half of 2008. In addition, valuations for private asset managers generally have declined along with those that are publicly listed.
Prices for asset managers “reflect the pressures they're under,” Mr. Pakenham said. “The general view is that there are fewer buyers around and the expected growth rate has been lowered.”