With faith restored in the global asset management industry, due to a four-month stock market rally and more voices saying the economy is on the mend, mergers and acquisitions in the industry will see a brisk pace in the second half of the year, Jefferies Putnam Lovell says.

What drove M&As in the first half of 2009 will continue in the next six months, the investment bank said: companies needing to raise capital, pure-play asset managers looking for large scale and expanded offerings, and private equity firms drawn to the industry’s potential for growth and strong profits.

However, M&As fell 34% in the first half of the year to only 72 transactions, down from the 109 that occurred in the first half of 2008. Due to the blockbuster BlackRock purchase of Barclays Global Investors, total deal value was $14.1 billion in the first half of 2009, representing $2.3 trillion in assets, far more than the $7.7 billion in deal value and $588 billion in assets in the comparable period of 2008.

“We expect divestitures to remain the driving force in M&A activity through the second half  of the year as the asset management industry faces its most radical reshaping on record,” said Aaron Dorr, managing director at Jefferies Putnam Lovell.

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