It's Musical Chairs For Buy-Siders

The asset management business continues to be a hotbed of deal activity, enhancing opportunities in a number of spheres - but also creating risks.

The value of acquisitions, IPOs and other sales of investment management companies more than doubled during the first six months of 2007 to a record $32.3 billion from $13.7 billion this time last year, reported Putnam Lovell NBF Securities this week.

"We expect activity to remain brisk and pricing strong," Ben Phillips, Putnam Lovell managing director and head of strategic analysis, said in a statement. He believes the trend is fueled by "new buyers from the private equity world, keen appetite for alternative investment skills, and the ambitions of fund companies to expand beyond their home borders."

Among potential career impacts for buy-side professionals:

- Demand for due diligence professionals will get a further boost, because institutions must conduct additional research on the new owner whenever one of their external fund managers or sub-advisors gets acquired.

- More cross-border job opportunities: U.S.-based asset managers are concentrating expansion efforts outside the country, while more foreign firms are making acquisitions within the U.S.

- Hedge funds and other alternative asset managers are increasingly coveted as targets by larger investment firms.

- An employer's change of ownership can create either danger or opportunity - or a combination of both.

The number of transactions involving asset managers climbed to 112 for the year to date, from 86 a year ago, according to Putnam Lovell.

In June alone, Blackstone Group completed a $4.75 billion IPO, Nuveen agreed to be sold for $6.3 billion to a group of investment banks and private equity firms led by Madison Dearborn, BlackRock announced a $1.7 billion purchase of Quellos Group, and Cantor Fitzgerald bought Zenith Asset Management.

Even Putnam Lovell itself changed hands last month. Jefferies & Company acquired the boutique investment bank that focuses on the financial services sector, from Canada's National Bank Financial Group.