European money manager divestitures are running into such high hurdles that the number of deals is now at its lowest level since the 2008-2009 financial crisis.
In the year ended June 30, only nine deals were announced, according to data from Sandler O'Neill & Partners LP, New York. In comparison, 18 were announced during the year earlier period, and 25 in previous years.
European banks — which need to raise capital and meet regulatory demands — are among the most likely to sell non-core assets including their money management businesses. However two stumbling blocks exist: “the quality of businesses; and, as a result, the valuation expectations vs. the market reality,” said Aaron Dorr, New York-based managing director and head of asset management investment banking at Sandler O'Neill.
With less willing buyers around, sources said, more banks might begin to consider selling their asset management businesses in pieces, rather than a package deal.
Potential sellers are “waiting for a nice deal to see what a successful transaction might fetch,” said Benjamin F. Phillips, partner at money manager consultant Casey, Quirk & Associates LLC, Darien, Conn. “Whatever the result, it will either unlock or freeze future deals.”
Two prominent deals could be announced in a matter of weeks, according to sources familiar with the transactions. Private equity manager Carlyle Group is negotiating to buy TCW Group Inc. from Societe Generale Group. And Beijing-based private equity companies Hony Capital Co. Ltd. and GCS Capital are in final talks to acquire Dexia Asset Management, which is owned by Dexia SA and had to be sold as part of the conditions of a Franco-Belgiangovernment bailout.
One source warned: “I wouldn't bet on (either deal) just yet.”
Rabobank — the owner of Robeco Group, a fund manager with about $226 billion in assets under management — also has been shopping for a buyer.
“Absolutely there's been an expectation that more banks will need to sell (their asset management businesses) to bolster capital,” said Baber Din, director in the investment management M&A team at Deloitte LLP, London. But “so far, practically none of the big ones have completed.”