Market volatility is making it tougher to value money managers, driving down price tags for many firms.
As a result, many firms are holding off on merger and acquisition activity. The big exception: deals by cash-strapped parent companies, such as the fire sale of much of the asset management division of Lehman Brothers Holdings Inc., New York, to private equity firms Bain Capital Partners LLC, also of New York, and Hellman & Friedman LLC, San Francisco for $2.15 billion. Earlier estimates had pegged the value of Lehman's asset management arm around $8 billion.
“Under the current conditions, it is very difficult to actually conclude deals because there is so much concern over what the value of assets under management will be in three weeks, let alone three months,” said Kevin J. Pakenham, a London-based managing director at Jefferies Putnam Lovell.
Silver Lane Advisors, New York, is estimating the number of manager deals will be down more than 30% this year, said Elizabeth Bloomer Nesvold, managing partner at M&A investment bank and consultant. “It's more challenging” these days, she said.
Year-to-date as of Oct. 9, data from Jefferies Putnam Lovell's data shows deal volume dipped 1%, with the amount of assets under management being acquired up 12.5%, vs. the same period in 2007. However, for the 12 months ended Sept. 30, deal volume was up 5%, while the amount of assets that changed hands dropped 31%, compared with the same period in 2007.
For both periods, disclosed deal values were down in 2008 more than 60%, according to Jefferies Putnam Lovell data.