Jefferies Putnam Lovell has put out the full version of its review of first half 2008 M&A activity. The company released an initial version in early July (see The MFWire, July 2, 2008).
Company Press Release
NEW YORK - (Business Wire) M&A activity in the global investment management sector in the second half of 2008 and beyond will be fueled, in large part, by diversified financial institutions refocusing their strategic direction and replenishing their depleted capital by shedding asset management operations, according to Jefferies Putnam Lovell, the division of Jefferies Group, Inc. (NYSE: JEF) focused on the asset management and financial technology industries.
First half 2008 dealmaking in the sector eased from the year-earlier period, highlighted by smaller transactions, record M&A involving alternatives managers, and - amid slumping stock markets - the absence of fund company IPOs, according to Nowhere to Hide, a Jefferies Putnam Lovell review of first half 2008 M&A activity in the global asset management and financial technology industries. While the number of deals over the next 12 months should continue at approximately the pace of the past six months, the aggregate deal value and assets under management changing hands is expected to rise, inflated by capital-raising moves of damaged financial institutions, according to Jefferies Putnam Lovell.
"Pursuit of non-traditional investment products, international expansion, and attempts to restore balance sheets at banks and other financial institutions will drive asset management dealmaking activity in the months ahead," said Aaron Dorr, New York-based Managing Director at Jefferies Putnam Lovell. "In the financial technology arena, strategic buyers will show enthusiasm for select technology vendors that appeal to the buy side, custodians, and exchanges."
In the first six months of 2008, buyers committed approximately $10.6 billion to acquire partial or full ownership of 104 fund managers, compared to the $36.9 billion spent in 115 deals in the year-earlier period. Approximately $909 billion of assets under management changed hands during the first half of 2008, compared to $1.23 trillion during the same period in 2007. A record 38% of transactions involved alternative asset managers, well above the 30% posted during the first six months of 2007. Cross-border transaction activity represented 34% of deals announced during the first half of 2008, robust by historical standards but below the year-earlier 43% level. As shares of the world's publicly traded fund managers slid 20% during the first half of 2008, and multiples of quoted firms fell from recent record highs, only one fund company took the public route in that period, compared with four in the first half of 2007.
Transaction activity among financial technology firms and securities brokerages was more subdued compared to the first half of 2007, although dealflow in asset servicing, payment processing, and market data provision remained vibrant. Share prices of US financial technology companies only fell 8% during the first half of 2008, unlike securities firms and exchanges, which lost 30% of their collective value during the first half of 2008.
Among the trends Jefferies Putnam Lovell expects to unfold during the next 12 months are:
* Asset management transaction activity is likely to continue at the pace of the first half of 2008 and will feature a number of larger financial institutions forced to sell their asset management subsidiaries to restock capital.
* Deals will take longer to complete and run a higher risk of collapse, reflecting overall conditions in the M&A market. Greater dispersion of pricing will exist as buyers become more discerning. Aggregate multiples for asset managers will soften slightly, reflecting a larger number of forced sales and sales of lower quality businesses.
* Despite challenging loan markets, private equity players still flush with cash will play an ever growing role as buyers.
* Interest in hedge funds and private equity managers will continue to drive record dealflow for alternatives.
* Most fund manager IPOs will be shelved until global markets recover.
* Cross-border asset management deals will remain robust, with Asian and Middle Eastern buyers wielding their growing purchasing power, and as sellers seek access to global clients and product capabilities.
* Strategic buyers will pursue select financial technology targets servicing the buy side, asset custodians, and exchanges, while venture capital and buyout firms will maintain vigorous deal activity in this segment.
About Jefferies Putnam Lovell
Putnam Lovell, the division of Jefferies & Company, Inc. focused on the financial services industry, offers a wide range of corporate advisory services, including mergers and acquisitions advice and capital raising. Putnam Lovell's global client base is comprised of diversified financial services firms, institutional and mutual fund managers, alternative investment managers, banks, broker-dealers, insurers, and financial technology firms. Putnam Lovell was founded in 1987 and operates from offices in New York, San Francisco, Boston, and London. Since July 2007, Putnam Lovell has been a division of Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF). For more information please visit www.jefferies.com/jpl.
About Jefferies
Jefferies, a global investment bank and institutional securities firm, has served growing and mid-sized companies and their investors for 45 years. Headquartered in New York, with more than 25 offices around the world, Jefferies provides clients with capital markets and financial advisory services, institutional brokerage, securities research and asset management. The firm is a leading provider of trade execution in equity, high yield, convertible and international securities for institutional investors and high net worth individuals. Jefferies & Company, Inc. is the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF; www.jefferies.com).
Subscribe to MFWire.com's News Alerts [click]
Email & Route 
Print 
Raw XML
