The first quarter was a quiet one for M&A in the asset management industry, but Jefferies Putnam Lovell expects the action to pick up, as firms sell off asset management operations amid retrenchment throughout the financial sector.

“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,” the investment banking group of Jefferies & Co., Inc. said Wednesday.

Jefferies reports that there were only 37 asset management transactions announced in the first three months of 2009, compared with 57 deals in the first quarter of 2008. Divestitures represented 51% of the deals announced in the first quarter of 2009, up from 28% in the year-earlier period, it said. The firm also noted that proportion of deals involving firms in the alternative asset management sector declined, as did the share of announced cross-border deals.

The total amount of assets under management that changed hands as a result of the deals in the first quarter of 2009 increased to US$552 billion from US$362 billion last year. However, one deal – the merger of Crédit Agricole and Société Générale’s asset management businesses – represented more than 60% of the total this year.

“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,” said Aaron Dorr, New York-based managing director at Jefferies Putnam Lovell. “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.”

IE