Money management M&A deals will be fewer and more complicated to structure in 2009, but pure-play asset managers should be among the more active buyers as commercial banks and insurance companies continue to shed non-core assets, according to investment bank Jefferies Putnam Lovell.
In an industry review released today, the firm predicted that relatively well-capitalized international financial institutions will also be active buyers in the U.S. as they look to establish global footprints.
After years of strong growth, alternatives-focused M&A will be driven by distressed sellers that would otherwise run the risk of folding, according to the release. Private equity firms, meanwhile, should be increasingly active as the year progresses, on the assumption that leverage will become more available.
Last year, all of the deals in the asset management industry were valued at $16.3 billion, a 70% decline from the record levels that were set in 2007. There were 220 deals in 2008, a 9% drop-off from the record 242 deals recorded the previous year.
But Aaron Dorr, managing director at New York-based Jefferies Putnam Lovell, said in an interview that there will be fewer transactions and deal values will be even lower in 2009, as most potential buyers are strapped for cash and the credit markets are still essentially frozen.
Strategic transactions, deals that would expand a firm's global reach or product set, for example, are off the table for now, he said.
At least for the first half of this year, the only major deals that will take place will likely be distressed transactions, where financial institutions are forced to sell part or all of their asset management businesses, he added.
One such deal that is expected to take place in the next several months is New York-based American International Group Inc.'s sale of its external investment division, which could fetch $1.5 billion to $2 billion.
Mark Bruno, a reporter at InvestmentNews, a sister publication of Pensions & Investments, contributed to this story