Sales of asset managers slowed in the most recent quarter after an 18-month surge as fewer independent and foreign-owned firms changed hands, Sandler O'Neill & Partners LP said Monday.
The New York investment bank remains bullish on the prospects for asset management deals because, it says, a lot of financial conglomerates and aging owners of the businesses are weighing sales.
But volatile global and U.S. economy hurt deal flow from July to September.
There were 28 deals in the third quarter, down 15% year over year and 28% from the second quarter, according to a research report compiled by Aaron Dorr, managing director and head of asset management investment banking for Sandler.
Sales of independently owned and alternative asset managers were down about a third from a year earlier, the report said. Deals involving parties based in different countries were down, too.
There were a handful of signs that the climate for asset management deals will remain relatively frothy. Though sales of boutique asset managers were down, the volume of deals driven by larger companies divesting unwanted operations held steady as big firms continued getting out of peripheral businesses lines, the report said.
This year still remains busier than 2010. There were 101 transactions through the end of September, or 16 more than in the first three quarters of 2010.
The total value of assets under management that changed hands in the quarter, $289 billion, was about double that of the previous quarter and year-earlier quarter. That was due largely to two big announcements last quarter: JPMorgan Chase & Co.'s $848 million deal to sell its 41% stake in American Century Investment Management to Canadian Imperial Bank of Commerce, and private equity firm Hellman & Friedman LLC's deal to sell its 27% interest in London-based asset management firm Mondrian Investment Partners to Mondrian's managers.
American Century has about $112 billion assets under management, and Mondrian manages about $70 billion.
CIBC's president and chief executive, Gerry McCaughey, in July described the Canadian bank's deal to buy the stake in American Century Investments of Kansas City, Mo., as a safe gamble. It is a business that requires little capital and carries little credit risk, he said. It also gives CIBC's large, profitable asset management arm access to new customers and products in an important market, he said.
"This is a lower-volatility business … that we know well," McCaughey said at the time. "We're entering the U.S. in a low-risk exposure way."
He said then that CIBC would not go shopping for other U.S. banking assets anytime soon.