NEW YORK – "Remorse and disgrace" rather than "hubris" is what is driving the investment management M&A business, Donald Putnam, managing director of Putnam Lovell NBF Securities, said yesterday.

Divestiture rather than acquisition is likely to continue as the prime driver for M&As, few as they are, Putnam told executives gathered for Money Management Institute’s annual convention here. Valulations and volume in the money management investment banking industry have dropped precipitously. Coming off an average of 80 to 100 transactions a year in the late 1990s, there were only 14 transactions averaging $31 billion in 2001, and a mere five, with $9 billion being the top price, for the Deutsche/ Fleming deal, in 2002, Putnam said.

Firms that made big purchases are now grappling with their holdings and are going to go through "massive restructurings" to find ways to "manage these businesses more strategically," Putnam said.

The investment banker’s outlook for the economy wasn’t any better. Putnam predicts zero to minus 5% market returns for 2003 and continued problems into 2004, when he predicts "corporate P&L balance sheets might be repaired, but consumer balance sheets will degrade," resulting in "another year of poor P/Es" and single-digit returns.

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