Sales of investment management companies worldwide this year have eclipsed previous records even amid turbulent capital markets, and M&A activity is expected to stay strong in 2008, driven by strategy and necessity, according to Putnam Lovell, the division of Jefferies & Company, Inc. focused on the asset management and financial technology industries.
Through mid-November 2007, buyers of asset management firms spent more than $46.7 billion in 208 transactions globally, according to preliminary data from New York-based Jefferies Putnam Lovell. By contrast, for the full year 2006, there were 192 asset management transactions, and the disclosed and estimated deal value reached $44.1 billion.
In 2007, key trends in asset management dealmaking have been initial public offerings by alternative and traditional firms, and cross-border transactions, which counted for approximately 40% of both the total number of deals announced and of the total amount of assets acquired.
“Long-term strategic concerns, amplified by the subprime-related fallout in the financial sector, will continue to stimulate deal flow in asset management during 2008. Companies emerging unscathed from the current crisis will seek to press their advantage and expand through acquisitions. Asset managers are the family jewels some financial firms may sell to pay for their credit excesses,” says Ben Phillips, managing director and head of strategic analysis at Putnam Lovell.
With approximately six weeks remaining in 2007, deal volume will continue to climb, but the total amount of assets acquired is likely to fall short of the record total of $2.6 trillion set in 2006, says Phillips. Last year’s total featured the two largest transactions in asset management history Bank of New York’s acquisition of Mellon Financial and BlackRock’s purchase of Merrill Lynch Investment Managers totaling $1.5 trillion in managed assets. Through mid-November 2007, the amount of assets acquired totaled $1.8 trillion.