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Funds management industry faces radical reshaping through M&A activity

Mergers and acquisitions among funds managers will continue at a steady pace for the remainder of this year as capital market stresses recede around the world, according to the latest report from Jefferies Putnam Lovell, a management consultancy.

M&A activity was lower in the six months to June than the previous corresponding period – 72 deals against 109 previously – but the total value of the deals was way up – $14.1 billion compared with $7.7 billion previously – thanks largely to the purchase of Barclays Global Investors by BlackRock. This deal, which is still to be completed, is worth $13.5 billion.

The total of funds under management transacted was also significantly higher at $2.3 trillion (compared with $588 billion previously) thanks to the BGI purchase, which accounted for $1.5 trillion of the assets.

Divestitures of funds management arms by banks and others looking to shore up their capital bases – such as the BGI deal – accounted for nearly half of the deals in the past six months.

And, according to Aaron Dorr, a New York-based managing director of Jefferies Putnam Lovell, divestitures are likely to remain the driving force of M&A activity for the rest of this year as the funds management industry faces its most radical reshaping on record.

Other themes surrounding deals in the past six months included pure-play asset managers seeking to add scale, fill product gaps and add talent as well as private equity firms being drawn to the industry’s growth and profit potential, Dorr said.

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Apart from the BGI deal, other large transactions announced during the past six months included Aquiline Capital Partners’ purchase of Conning & Company, JP Morgan Chase’s purchase of a minority stake in Highbridge Capital which it did not already own and Woori Finance’s purchase of Credit Suisse’s 30 per cent of Woori Credit Suisse Asset

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