Sales of investment management companies worldwide this year have eclipsed previous records even amid turbulent capital markets, according to a study.
Putnam Lovell, a division of Jefferies & Co. Inc. that focuses on the asset management and financial technology industries, said that M&A activity is expected to stay strong next year, driven by strategy and necessity.
"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," said Ben Phillips, a managing director and the head of strategic analysis at Putnam Lovell. "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."
Through mid-November, buyers of asset managers had spent more than $46.7 billion on 208 transactions worldwide, according to preliminary data from the Putnam Lovell study. By contrast, for all of last year, 192 asset management transactions took place with disclosed and estimated deal values totaling $44.1 billion.
This year, key trends in asset management dealmaking have been initial public offerings by alternative and traditional firms and cross-border deals, which accounted for about 40% of both the total number of deals announced and of the total amount of assets acquired. IPOs thus far this year have represented 15% of asset manager deal value.
The Jefferies Putnam Lovell study, which was released Thursday, predicted that deal volume will continue to climb for the rest of this year but that the total of assets acquired is likely to fall short of the $2.6 trillion record set last year.
Last year's total featured the two largest transactions in asset management history — Bank of New York Co.'s purchase of Mellon Financial Corp. and BlackRock's purchase of Merrill Lynch Investment Managers. These deals accounted for $1.5 trillion of assets under management. Through the middle of this month, $1.8 trillion of assets have been acquired.
