Liberty Financial Companies of Boston appears to be struggling to find a buyer for its asset management units and may have to drop its asking price in order to secure a buyer, according to industry analysts.

Liberty announced its intention to sell its asset management, insurance and banking units last November in a shareholder report. Earlier this month, Liberty's annuity and banking units, Keyport Life Insurance Company and Independent Financial Marketing Group, were purchased by Sun Life Financial of Toronto for an estimated $1.7 billion. Liberty's insurance products had $14.8 billion in assets under management, as of Dec. 31, according to SEC documents.

In December, Liberty sold Private Capital Management, a division of Stein Roe & Farnham of Chicago, to the executives running the firm for $40 million. Private Capital Management had $9.1 billion in assets under management at the time of the sale, according to SEC documents.

The only piece of the business remaining to be sold is Liberty's asset management unit, which is comprised of Stein Roe & Farnham, Newport Pacific Management of San Francisco, Liberty Asset Management of Boston, Crabbe Huson Group of Portland, Ore., Progress Investment Management of Boston and Liberty Wanger Asset Management of Chicago. Combined, those businesses held $49.9 billion in assets as of March 31, according to a company spokesperson.

It has been nearly seven months since Liberty first announced its plans to sell and while a couple of potential buyers were reported in the financial press to have shown an interest, Liberty's asset management business remains on the market.

Much of the difficulty Liberty is having in selling its asset management units is related to deflated financial service firm stock prices, according to Chip Roame, a principal with Tiburon Strategic Advisors of Tiburon, Calif. Many potential buyers would need to leverage more of their stock than when the stock market was stronger in order to purchase Liberty, which is an unattractive option, Roame said.

Another factor may be that the individual pieces of the firm are too diverse and all of the parts do not fit with most companies, according to Neil Epstein, an analyst with Putnam, Lovell, de Guardiola & Thornton of San Francisco.

"I think the fact that you have a pool of subsidiaries that are somewhat independent of each other makes it hard to pick them up," he said. "There is no one clear manager. It's not clear that there is a lot of integration that has gone on over the years."

Generally, asset management and advisory companies sell within three to four months of an announcement of their being for sale, however market conditions have put a damper on merger and acquisition activity, according to Anthony Nuland, a partner in the Washington D.C. office of Seward & Kissell of New York.

There could also be a variety of other factors which are making it difficult for Liberty to sell its businesses, including an asking price that is scaring off potential bidders, he said. A year ago, many companies were interested in buying asset managers and managers could fetch a premium price for their businesses, he said.

"My sense is that has all backed off," he said.

There also seems to be recognition among potential buyers that success in the asset management business is not just a matter of simple acquisition, he said. Lackluster markets are shrinking assets and profit margins and most asset managers are losing business, he said.

"Would I buy an asset manager?" he said. "Probably not for what they would be willing to sell it to me."

Other potential impediments to a sale include that there could be troubled or tenuous advisory relationships, Nuland said. Another possibility is there is some regulatory problems that would make the businesses a liability, Nuland said.

Generally, regulatory problems would be uncovered by potential buyers when they conduct due diligence on the firm they are interested in acquiring, Roame said. Normally, problems relating to due diligence become apparent when you have several interested buyers suddenly lose all interest in acquiring the firm, he said.

Since last November, The Asian Wall Street Journal and others have reported that American General of Houston, Prudential Plc of London and First Union of Charlotte, N.C. were interested in buying Liberty's asset management unit. Instead of acquiring Liberty, American General and Prudential Plc decided to merge and First Union decided to purchase Wachovia of Atlanta and Winson-Salem, N.C.

While due diligence problems may be part of the problem, sale of the firm may have fallen through simply because each interested party found better acquisition targets with strengths they needed, Roame said.

There is no prescribed time limit on the sale and securing a good price for the firm is the primary concern, said Morgan Porter, a senior vice president with Liberty.

The question Liberty must address now is whether it should split up the parts of its asset management unit and try to sell them individually, Roame said. The company may be able to command a better price selling them individually than bundled, he said.

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