Large asset management mergers and acquisitions deals will likely occur this year, according to a report from Jefferies Putnam Lovell, as firms take advantage of distressed sales and divestitures.
Last year, there were 217 financial M&As. By volume, 2008 was the second most-active year on record, following 242 deals in 2007. By value, $1.99 trillion in assets under management exchanged, 2008 was also the second biggest year, tied with $1.99 trillion in 2007. The biggest year in terms of assets occurred in 2006, when $2.65 trillion in assets under management were bought or sold.
However, in terms of the value of the deals, companies spent only $16.1 billion on transactions in 2008, down a whopping 68% from $52.1 billion worth of deals in 2007. Last year, only three deals exceeded $1 billion in purchase price, compared with 15 $1 billion-plus M&As in 2007.
In the second half of last year, two-thirds of the value of the deals were of distressed divestitures, a record total. Private equity firms represented only 10% of the value of the deals in 2008.
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, said Aaron Dorr, managing director at Jefferies Putnam Lovell. We expect pure-play asset managers and private equity firms to be the biggest beneficiaries of this massive reshaping of the industry.