Mergers and acquisitions will enter a new phase in 2010 which will see strategic deals involving independent firms increase while divestitures to raise capital subside, according to Jefferies’ Financial Institutions Group, the investment banking group of Jefferies & Company (previously known as Jefferies Putnam Lovell).

2009 was a year of mega-deals, with nine transactions each involving more than $100 billion in assets under management. Deal volume declined last year to 143, from 219 in 2008, but an all time record $4 trillion in assets under management changed hands. Total disclosed deal value jumped to $24.9 billion from $15.9 billion in the previous year. 

As reported elsewhere by WealthBriefing today, yet another deal has been announced, with Royal Bank of Scotland saying it has sold its asset management firm to rival UK manager Aberdeen Asset Management.

The biggest deals in terms of AuM were BlackRock’s purchase of Barclays Global Investors, announced in June 2009 ($1.44 trillion), followed by Crédit Agricole Asset Management combining with Société Générale Asset Management to form Amundi Asset Management, announced in January 2009 ($839 billion combined AuM).

In terms of disclosed deal value the biggest deals were, again, the Blackrock-BGI deal ($13.5 billion) followed by Deutsche Bank’s acquisition of Sal. Oppenheim, announced in October 2009 ($1.9 billion).

Many such deals were driven by desire by banks to raise capital through spinning off assets, with divestitures representing 60 per cent of all deals in the fourth quarter. However, Jefferies sees a new phase coming into play this year, as firms regain confidence and the motivation for deals augments towards strategic growth.

However it will be a gradual process, with divestitures still featuring in M&A activity.

“We expect divestitures to continue to play out through the first half of 2010 when the urgency of capital raising and strategic realignment of financial institutions should taper off,’’ said Aaron Dorr, a managing director at Jefferies’ Financial Institutions Group.

Significant deals involving independent firms in 2009 were Advisory Research’s sale to Piper Jaffray and Metropolitan West Asset Management’s purchase by TCW. These deals, and other similar ones which took place in the fourth quarter of 2009, signal the M&A picture is changing and will help determine deal-making activity in 2010, said Jefferies.