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Is the Asset Management Industry Ripe for M&A?

BlackRock's purchase of Barclays Global Investors could spur more consolidation.

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Although the asset management industry was turned completely on its head following the collapse of the credit and equity markets last year, there has been very little consolidation to speak of this year. The biggest deal of 2009,  BlackRock's (BLK) $13.5 billion acquisition of Barclay's Global Investors (BGI), a unit of  Barclays PLC (BCS), has certainly sent shockwaves through the industry, but much of the deal making (including BlackRock-BGI) has been focused on divestitures from financial institutions looking to streamline their operations or improve their capital structure. With assets like  Bank of America's (BAC) Columbia Management Advisors (CMA) and  Morgan Stanley's (MS) Van Kampen fund business still being shopped around, we expect this trend to continue through the end of the year.

What we're less likely to see, however, is rampant consolidation among the remaining publicly traded asset managers, many of whom are still struggling to get back on their feet in the aftermath of the bear market. Much as we believed that a large number of deals would not occur earlier in the year (when most asset managers were struggling to figure out what was happening in their own house, let alone what was going on in someone else's), we think the recent rally in the markets, which has improved the operating results and stock prices of just about every publicly traded asset manager, could be a stumbling block for consolidation.

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Greggory Warren does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.