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August 6, 2008

Asset management sell-offs to fuel M&A

by Richard Kilner

Story link: Asset management sell-offs to fuel M&A

In the latter half of this year worldwide activity in the Merger & Acquisition (M&A) sector of investment banking will be increased due to the selling off of asset management firms by companies seeking to shore up weakened capital.

The prediction has been made by the Jefferies Putnam Lovell division of investment bank Jefferies Group, Inc.

A Jeffries Putnam Lovell report (Nowhere to Hide) relates that the first half of the year saw smaller deals taking place, the absence of fund company IPOs and record M&A occurring with alternative managers.

The division believes that in the next 12 months trading will continue at approximately the same level as it is presently.

However, aggregate deal values and the amounts changing hands are forecast to rise, increased by weakened firms wishing to bolster their capital.

The first half of 2008 saw $909bn of assets under management change hands, significantly less than the equivalent amount in the preceding year ($1.23 trillion).

Alternative asset managers were involved in 38% of the deals struck this year, a record level and significantly larger than the 30% recorded in 2007.

Financial technology and brokerage firms saw less activity than during 2007, with asset servicing, payment processing, and market data provision performing well.

Securities firms and exchanges saw their total value fall by 30% in the first six months of this year, with financial technology losing 8%.

In conclusion, Jeffries Putnam Lovell predicts that deals will take longer to complete in the immediate future, and have a higher chance of falling through.

The division also forecasts that private equity buyers will increase their role in buying, defying the economic downturn.

 

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