Mergers and acquisitions among asset management firms will remain high in the second half of the year, according to Putnam Lovell. While the market turbulence won’t deter most buyers, however, it, along with a curtailed leveraged finance industry, could curtail some private equity firms.
In the first half of the year, there were 114 M&A deals valued at $33.7 billion, with the acquired firms having $1.24 trillion in assets under management. That’s a 31% increase in the number of deals from the first six months of 2006, when there were 87 such transactions. And the value of the deals increased 142%, from $13.9 billion a year ago.
Throughout all of 2006, there were 191 asset management deals valued at $2.6 billion, with $44 billion in assets under management.
Many of the deals in the first half of this year, 30%, were for alternative asset managers, and private equity firms were particularly active, accounting for 25% of all assets acquired.
Buyers paid an average 11.9 times EBITDA, the highest in 18 months.
“We expect asset management M&A activity to stay vigorous as demographic and globalization trends remain favorable,” said Ben Phillips, managing director and head of strategic analysis at Putnam Lovell. “Moreover, a turbulent market will test alternative managers as never before. Transactions involving alternative managers that blend strategy and liquidity will result in successful deals that deserve premium pricing.”