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Rating:The BGI Sale Single-Handedly Kept Fund M&A Alive in the First Half of 2009 Not Rated 5.0 Email Routing List Email & Route  Print Print
Wednesday, August 26, 2009

The BGI Sale Single-Handedly Kept Fund M&A Alive in the First Half of 2009

Reported by Neil Anderson, Managing Editor

Is the pace of deals slowing in the mutual fund industry? A glance over the MFWire's own Deal Sheet shows that, if you set aside the sale of Barclays Global Investors to BlackRock, the total mutual fund assets that changed hands via fund advisor M&A and fund adoptions fell substantially year-over-year in the first two quarters of 2009. And 2009's deals, with the exception of BGI, seem to be substantially smaller ones.

Mutual Fund Industry Deals
Q1-Q2 2008 Q1-Q2 2009 (including BGI) Q1-Q2 2009 (w/o BGI)
Number of Deals 8 9 8
Number of Mutual Funds Affected 44 234 40
Total Mutual Fund Assets Affected (in billions) $36.989 $301.57 $4.412
Average Mutual Funds Per Deal 5.5 26 5
Average Mutual Fund Assets Per Deal (in billions $4.624 $33.508 $0.552
Source: Lipper
Thanks to BGI, a total of nine deals involving at least 234 U.S. mutual funds moved in the first half of 2009, representing $301.57 billion in mutual funds. That seems like a big increase over the first half of 2008, when eight deals involving at least 44 mutual funds with more than $36.989 billion moved from one family to another.

The average deal in the first half of 2009 involved 26 mutual funds with $33.508 billion in assets, while the average deal from the first half of 2008 involved 5.5 mutual funds and $4.624 billion in assets.

Take out BGI, though, and the numbers look very different. Without that single giant deal, at least 40 U.S. mutual funds moved in eight deals in Q1 and Q2 2009, holding only $4.412 billion. That's a drop of more than 88 percent in mutual fund M&A assets when compared with the $36.989 billion from the first half of 2008. Perhaps volatile markets and the credit crunch put a damper on fundsters' deal-making.

Removing BGI from the equation also reveals that the deals seem to be getting smaller in 2009. Setting aside BGI, the average deal in the first half of 2009 involved only five mutual funds and $551.5 million in assets. In light of the down market, that may not surprise many fundsters. The down market may have hit smaller fund firms harder than most, making economies of scale (and the lack thereof) a key driver of mutual fund M&A so far in 2009. 

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