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Retrenchment theme to dominate global asset management dealflow, says Jefferies Putnam Lovell

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With banks and insurers offloading desirable asset management franchises to raise capital, 2009 is shaping up as a year with fewer, albeit headline-grabbing M&A transactions, follow

With banks and insurers offloading desirable asset management franchises to raise capital, 2009 is shaping up as a year with fewer, albeit headline-grabbing M&A transactions, following a lackluster first quarter, according to Jefferies Putnam Lovell.

Only 37 asset management transactions were announced in the January through March period, compared with 57 deals in the first quarter of 2008, according to Jefferies Putnam Lovell. While the amount of assets under management transacted in the first quarter of 2009 increased to USD552bn from the year-earlier USD362bn, one deal – the union of Crédit Agricole and Société Générale’s asset management businesses – represented more than 60 per cent of the total in the entire three-month period.

"As they seek ways to raise capital, distressed banks and insurers are finding their fund businesses are among the most saleable assets, with pure-play asset managers and private equity firms the most motivated buyers," says Aaron Dorr, New York-based managing director at Jefferies Putnam Lovell (pictured). "While we anticipate large transactions to occur this year, M&A volume in the global asset management sector will be down, reflecting the market and economic stresses worldwide."

Divestitures represented 51 per cent of the deals announced in the first quarter of 2009, up from 28 per cent in the year-earlier period. The number of deals involving alternatives firms declined to 24 per cent from 37 per cent, while announced cross-border deals totaled 14 per cent, compared with 32 per cent in the first quarter of 2008.
 
Significant global asset management M&A transactions announced in the first quarter of 2009 include:

• Crédit Agricole Asset Management combining with Société Générale Asset Management (to be owned 70 per cent by Crédit Agricole and 30 per cent by Société Générale);

• Mitsui Life Insurance’s sale of its 25 per cent stake in Sumitomo Mitsui Asset Management to Sumitomo Mitsui Banking (ten per cent), Mitsui Sumitomo Insurance (ten per cent), and Sumitomo Life Insurance (five per cent);

• Henderson Group’s acquisition of New Star Asset Management; and

• Apax Partners’ sale of a 7.7 per cent interest to GIC Special Investments and Future Fund.

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