As the global financial landscape continues to reshape, mergers and acquisitions this year will be led by those firms seeking capital or those that have capital in hand to put to work, according to Jefferies Putnam Lovell.

While M&As were robust in the first half of 2008, they ground to a halt in the second half of the year, according to the investment bank.

“Pure-play asset managers, acting alone and in concert with private equity firms, will increasingly take advantage of this unique situation as commercial banks and insurance companies shed non-core investment businesses to raise capital,” said Jefferies Putnam Lovell Managing Director Aaron Dorr. “In asset servicing, we see a wave of consolidation looming, as undercapitalized companies look to divest operations, while small- and mid-sized independents seek shelter within better capitalized partners.”

Due to a lack of available cash, buyers will become more creative with M&A financing, turning to asset swaps, stock, joint ventures, private equity and complex earnout provisions. That said, buyers with cash in hand will be in a strong negotiating position and will be active acquirers.

As Jefferies Putnam Lovell put it, “Better-capitalized international institutions will be increasingly active, and cross-border deals will represent a disproportionate share of deal flow as non-U.S. buyers seek to globalize via acquisition at historically low pricing levels.”

Acquisition targets will be traditional long-only asset classes, while alternative asset classes will be largely shunned. “The alternatives sector will be reshaped in 2009,” the firm said, “as investors reconsider fee levels, demand more flexible capital lock-up periods and insist on greater transparency. Alternatives transactions will be driven primarily by sellers that otherwise run the risk of folding, unable to generate a profit on shrinking management fees along.”

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