Asset management M&A activity is expected to rise this year, with continued distressed sales by investment banks and insurance companies, but the good news for pension funds is the emergence of a strong independent sector in Europe.
According to the latest report by Jefferies Putnam Lovell, an asset management researcher and corporate advisor, pure-play asset managers and private equity firms will be the biggest beneficiaries of a “massive reshaping of the industry”.
The value of M&A deals among asset managers in major countries slumped to $US16.1 billion in disclosed deal value in 2008, compared with $52 billion in 2007 the report says. The number of deals remained reasonably high, however, at 217 against 242 in 2002. There were only three deals worth more than $1 billion in 2008 compared with 15 in 2007.
Jefferies Putnam Lovell says: “The most active buyers over the past decade, namely commercial and investment banks and insurance companies, are now becoming sellers of, or seeking strategic partnerships for, their asset management businesses…
“We expect pure-play asset managers and private equity firms to be the biggest beneficiaries of this massive reshaping of the industry. European banks are at last facing up to their success as distributors and their failure as manufacturers of investment management services. This year we will see the further emergence of a strong independent sector in Europe, following the well-established US model.”
Alternative managers accounted for a record 33 per cent of the total number of M&A deals in 2008, but the pace slowed dramatically in the fourth quarter amid massive redemptions and performance woes, the report says.
Most of the M&A action in the second six months of the year was attributed to “divestiture activity”, reflecting selling by distressed and motivated sellers.