Just how good a year 2010 shapes up to be for asset manager merger-and-acquisition activity will depend a lot on whether volatile financial markets can stabilize, deal makers contend.
But even as they look ahead to the second half of the year, M&A specialists disagree on whether the first six months of 2010 shows a recovery from 2009.
One report released on July 1 by financial services consultant Freeman & Co., New York, says overall M&A activity among asset managers as of June 30 increased 19% from the year earlier period. The Freeman report shows 102 transactions in the first half of 2010 compared with 86 in the first-half of 2009.
“Activity in 2010 has rebounded from the depths of early 2009, and 2010 should be a much more robust year,” Eric Weber, managing director and chief operating officer at Freeman, said in a telephone interview.
But Mr. Weber noted that activity is still down about 10% from 2007, the best in terms of numbers of deals, which he attributes to continued uncertainty about financial markets.
But the financial institutions group of consultant Jefferies & Co., New York, has a contrasting view. In its July 1 review, the firm noted only 51 deals in the first half of 2010 compared with 77 for the same period in 2009.
Part of the reason for the difference is that Freeman data include 47 deals that involved financial firms managing less than $500 million in assets. In the first half 2009, Freeman tracked 39 such deals.
Jeffries' report, for the most part, covers managers with more than $500 million under management.
Aaron H. Dorr, managing director of the financial institutions group at Jefferies, said the firm's data excludes the majority of firms with assets under management of $500 million or less because “they tend to have little or no goodwill value attached to them.”
But Mr. Weber said his firm includes deals involving the smaller firms because they exist. He said there is still a robust market for smaller transactions, probably because the smaller firms had more pressure on their revenue and operating margins.
Mr. Weber said the number of large deals, involving firms managing more than $10 billion in assets, increased to 10 in the first half of 2010 from nine in the year-earlier period.
He said however, the combined AUM of managers involved in transactions decreased to $407 billion in the first six months of 2010 compared with a year earlier because of two 2009 megadeals: BlackRock Inc.'s acquisition of Barclays Global Investors and Credit Agricole's acquisition of Societe Generale Asset Management.